STAFF NEWS & ANALYSIS
Iceland Reformers’ New Bank Plan Just as Problematic as the Last
By Daily Bell Staff - April 11, 2016

Revenge of the Vikings — Iceland Will Create Its Own Money … Iceland is taking the money back from the clutches of the private fractional reserve lending cartel.  It’s happened before in history, and with great success, but it has also prompted a violent backlash from the elites …  – 21st Century Wire

Usually we comment on the elite propaganda of mainstream media reports, but we’ve always made an exception for “public money.”

That’s because we tend to believe it’s an elite meme – a fallback for the same people who invented the current central banking economy. So long as they can keep money controlled by a central authority, they can take over the monetary facility once more, sooner or later. It doesn’t matter who runs the monopoly central bank so long as one exists.

Nonetheless, on a regular basis we get informed that the problem with modern money is that it is controlled by a private “cartel.”

If the “government” itself controlled money, then economic conditions would be far more tolerable, we learn wearily over and over again.

This article, excepted above, makes some of the same arguments, though this time the issue is not hypothetical as Iceland is considering a form of “public money.”

More:

Agence France Presse reports: Iceland’s government is considering a revolutionary monetary proposal – removing the power of commercial banks to create money and handing it to the central bank. The proposal [was contained] in a report written by a lawmaker … Frosti Sigurjonsson.

The article goes on to make all the predictable arguments about “private”  central banking (which is actually anything but private). We learn predictably that it’s necessary for the government to take over money production and (presumably) issue it out without debt.

What would happen if this wonderful occurrence took place? The article fills us in:

If accepted in the Iceland parliament, the plan would change the game in a very radical way.  It would be successful too, because there is no bigger scourge on our economies than commercial banks creating money and then securitizing and selling off the loans they just created the money (credit) with.

Say what? It’s true that commercial banks create money, but the central bank ultimately controls the “price” and volume of credit available. Theoretically, a modern central bank could entirely choke off a country’s money supply by sending interest rates sky-high. Paul Volcker did something like that in the early 1980s.

In fact, as we’ve seen with quantitative easing, central banks can arrogate powers to themselves that we’re not even aware of. An example would be negative interest rates, also being imposed by central banks.

To imply somehow that the “biggest economic scourge” is credit creation by commercial banks is simply untrue. The biggest economic scourge is the virtually unlimited monetary power of central banks.

Get rid of commercial banking and nothing would happen to the world’s current disastrous state. Over time, business cycles would reignite as destructively as ever. Get rid of monopoly central banks and everything would change.

Central banks sit at the heart of credit expansion because they provide society’s seed money. Modern, monopoly central banks have an arsenal of monetary and credit weapons second-to-none.

Iceland’s “reform” sounds strange to us until one considers that it is basically being produced by the government. Presumably, that’s why under this plan, Parliament would have the final say regarding the volume and price of “money.”

These sorts of suggestions are terribly sad. They confuse people about what is money and how society can best be organized to use it.

In fact, money is very simple as Murray Rothbard showed us. It’s like anything else, a competitive commodity. Gold and silver won the competition over thousands of years.

If government and well-meaning monetary planners would just step out of the way, Western economies would surely revert to the use of gold and silver in a short period of time.

Business cycles would diminish because the market itself would operate to damp an over-abundance of credit. In fact, savers would experience a gentle deflation over time, as gold-based money tends to appreciate in value relative to technology.

Conclusion: Don’t be fooled by the kind of rhetoric we’ve just examined. The problem isn’t public banking or private banking. The problem is simply that the modern central bank has a monopoly on printing money. Get rid of the monopoly and society would prosper as it has before.

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  • Praetor

    Excellent analysis! Lets hope the Icelanders read this, and are not fooled by this deception!!!

  • alaska3636

    The centralization of power, via technocratic management, is the central issue facing humanity and its governance.

    Centralization beyond the size necessary for people to govern themselves attracts a high-time preference kind of person whose interests are primarily to profit in the short-term with the least possible investment of resources (lies are cheap). These types of people act as parasites on an economy using the levers of its institutions to benefit themselves and their backers and associates at the expense of the people they have been trusted to look after.

    This crisis of faith repeats itself throughout human history as people have been conquered or, more recently, traded their freedoms for the promises of safety from people who merely want control of the levers of civilization. In response to trading freedom for promises, government expands and as it expands so does its power and reach. Government manifests some benefits, but then, the question is not whether civilization should be governed, but rather how much and by whom?

    The Western media presents a single unified idea of how much and whom: everything needs to be regulated by technocrats. What is a technocrat? Somebody who has attended an elite university and is probably from a distinguished, elite family. Sound familiar?

    As DB states: The problem isn’t public banking or private banking.

    The issue is fundamentally a question of who controls currency on behalf of whom. Currency is 50% of every transaction and its flow and control is integral to a complex economy. The centralization of money is a veritable ring of power and a pandoras box all rolled into one poorly understood and easily manipulated institution: the central bank. Simply put: money should not be centralized on a grand scale. This is the equivalent of putting cake (easy access to capital) in front of a fat kid (unscrupulous liars).

    • Bruce C.

      Hi, Alaska.

      I finished that book (Conspiracies of the Ruling Class by Lawrence Lindsey) and his description of the “Ruling Class” is like what you describe. Although he doesn’t use the term “technocratic management” he does claim that one of the main problems with the US government is that, starting with Woodrow Wilson, the Constitutionally mandated powers of Congress have been dissipated by the creation of specialized agencies full of experts (which is the same thing). Congress went along with it because it allowed them to avoid making decisions and being held accountable. Now the unelected bureaucrats get blamed, if anyone does. According to Lindsey, Congress now controls only about 30% of what they’re supposed to. Interestingly, Congress reneging on their responsibilities is not Constitutional (i.e., they don’t have the power to delegate their powers), which could provide a basis to reverse things.

      • alaska3636

        Bruce,

        Thanks for the update!

        Technocracy is a cultural destroyer; I think that more cultures might make the world a better place because a culture encapsulates the decentralized knowledge of a lifestyle that works for different sorts of people.

        Technocracy is like the Homo Sovieticus: deigning to design what ought to be important to people and purging those who disagree. Shostakovic had to lie about what his symphonies meant to a Cultural Council. He was afraid of disappearing for much of his life. Lies are friction and friction wears things down. Too much friction destroys things.

        *Edit*
        It just occurred to me that to extend the metaphor, some application of friction is good as in the brakes of a car. Some friction allows adaptability at the expense of a little wear-and-tear in order to avoid catastrophe. Now, I’m not sure what any of it means 🙂

  • dave jr

    From the Wire article – “It would be successful too, because there is no bigger scourge on our economies than commercial banks creating money and then securitizing and selling off the loans they just created the money (credit) with.”

    What is being called a scourge here is money backed by collateral, which is problematic for collectivist commandeering pigs to get their hands on because the market is responsible for it and actually tries to protect it from pilferage.

    As Bugsy and Mugsy Statists take over economies by an onslaught of heavy regulation aimed at fostering monopolization; naturally, free markets create less money in an uncertain and corrupt atmosphere.

    It is so typical of the flapping faces in the MSM, the numb skulled accomplices to blame the victim and cry out for even more legalized corruption in order to solve the problems created by legalized corruption.

  • r2bzjudge

    Pegs always fail. Gold standard is a peg. The dollar was pegged at 35 to an ounce of gold, after Roosevelt devalued the dollar. Then came the Vietnam War and Great Society and the dollar bin was busting at the seams. The peg broke under Nixon.

    Various countries have pegged their currency to another. Those pegs ultimately were broken. Now governments get bent out of shape if their currency rises too much, as it suppresses their ability to sell exports to other countries. The Japanese government is upset about the recent rise in the Yen.

    A gold standard is only going to work until push comes to shove, as it always has with any government, which is why there is no gold standard now, with all currencies floating in relation to gold.

    A gold standard may return at some point, but it will eventually be broken again. Everything is cyclical, which is why we are in another economic depression, which governments seem determined to make worse than the previous one in the 1930’s.

    • alaska3636

      Anything instituted by force is a price fix or a peg. Making taxes payable in a specific currency is historically how kings were able to inflate the money supply to pay for foreign wars.

      People should be free to choose which commodities they use as media of exchange. I imagine that given the choice, precious metals and fractional reserve currency would fill a number of niches worldwide. Precious metal is the only historical guarantee of purchasing power retention though.

    • dave jr

      I’m not so sure the gold standard failed. Roosevelt decreeing Federal Reserve Notes irredeemable for gold did not cure the Great Depression. The spoils of WW2 allowed the US Government and Central Bank to roll back regulation and monetary manipulation for a while.

      Markets need to measure everything and units of value is no different. In order to measure anything fairly, there has to be an agreed upon stable standard. An hour is 1/24th of the earths rotation along with minute and second denominations. A foot is roughly the length of a soldiers foot, a mile being 1000 paces (two steps), etc.

      Not having a ‘pegged’ standard for measuring value opens the door to manipulation which always flows from authority down to that which the authority itself depends on. Authority can never cure the monetary ailments it creates. All it can do is back off and let things heal. It rarely happens though, as war and plunder is often the preferred choice.

      By now civilizations should expect the same sad story. By now civilizations should have learned not to buy into it. The Bernanke doesn’t want deflation. The Bernanke wants ‘mild’ inflation. I want to know who elected the Bernanke (now Yellin) lord? Cripes, pharaohs, emperors, kings and czars of old must be rolling in their graves with jealousy.

      • alaska3636

        In the context that “gold standard” is bandied about, it appears to refer to a monetary system enforced to the degree which is currently enforced with the FRN. I don’t think that it would work in the sense that it would maximize individual freedom and the enhance the pricing mechanism. It might be better than the FRN, but I think we can set the bar higher.

        I think that the steady valuation of gold leads people to forget that a long-running valuation is still subjective. Gold may be king for 1000 years, silver for a 100 and copper for 50. Monetary systems should be flexible enough to adapt to the needs of its users. From a pure liberty standpoint (which I also think maximizes the pricing mechanism and hence capital accumulation), forcing people to use a currency in a community seems reasonable if people can leave, but the bigger that community gets (like a whole country), even a gold standard would prove restrictive and, IMO, not really classically liberal.

        • dave jr

          I agree that, “monetary systems should be flexible enough to adapt to the needs of its users”. People should be able to transact in any mutual agreeable way without interference of legal tender law. But a standard unit of measure, a whole different issue, should not be flexible, nor would it be tolerated in a free market. Pounds, ounces, gallons, feet, yards, square feet, etc. all have definitions. The Federal Reserve Note started out with a definition too. But no longer. That is one of the first things the monopolist authoritarians ‘fixed’, and they have been ‘fixing’ things ever since. Swell job they are doing.

          • alaska3636

            Good point.

    • Pater Tenebrarum

      The gold standard is not a “peg”. In a true gold standard, bank notes merely represent certificates to fixed weights of gold, and gold is money. Money substitutes do not lead a separate existence – although deposit money created by means of fractional reserves (fiduciary media) represents a notable exception to this rule. Anyway, the gold standard has never “failed” historically – what happened was that governments deliberately destroyed it in order to be able to implement the welfare/warfare state. Credit expansion still occurred in times of the gold standard, but it never went very far. In fact the settlement systems organized by private banks prior to the establishment of the Federal Reserve were characterized by an extremely conservative approach. The current system is sheer madness by comparison, and not surprisingly, has primarily succeeded in destroying economic growth and putting us all at great financial risk.

  • Pater Tenebrarum

    I agree with this 100% – it is simply a warmed up version of the so-called “Chicago Plan” – here is a brief critical comment on such schemes in the context of the Swiss “Vollgeld” initiative: http://www.acting-man.com/?p=42573

    • Thanks for the link. Great job. The Swiss initiative is the same nonsense.

  • DavidPenfold

    You totally miss the point. The difference is that currently money is created as debt so the principal disappears when it is paid back, leaving the interest to pay back from new money.

    The sovereign money proposal means that money becomes equity so does not disappear as it isn’t an IOU that is paid back. That means the money creation process becomes a tiny fraction of existing circulating money, meaning that those who create money would no longer have the power to make or break economies as they do now.

    The so-called monopoly on printing money becomes far less of a scary monster when you see it in this context. One of the many benefits of these Chicago-style plans is that both Government and private companies/individuals no longer become indebted more and more over time. This isn’t an act of “big government” but a means of taking the creation of money away from those whose interests are so misaligned with the rest of the economy, as well as decreasing the impact of the money creation process.

    Those who are fixated by the gold standard don’t seem to realise that this can easily be manipulated by those who control the supply of gold, meaning vested interests can control monetary policy in that scenario too.

    • Financial illiteracy is a curse that is almost impossible to combat. Nonetheless … the issue here is very simple and it has to do with MONOPOLY. In this case monopoly money printing. Monopolies never work. Over time they distort, eventually they have a ruinous impact.

      If it is a money monopoly, it doesn’t matter if the monopoly is small or large. Violence will beget bloodshed and bloodshed will create ruin. Society will inevitably end in failure.

      Anyway … this is the same Chicago school that spawned Milton Friedman who gave us the graduated income tax and ludicrous “steady state” Fed. Also, you have no idea how much interest circulates currently. You have no idea how much is “paid back.” This term “paid back” is meaningless as Gary North has written splendidly on the subject, showing us how difficult it is to extinguish currency. Paying it back just recirculates it.

      On and on the game goes, driven by ignorance and authoritarianism. Someday, somehow, at some point, people will allow freedom to flourish once more. They will refuse the too-clever remedies of technocracy. They will think for themselves.

      • DavidPenfold

        Money printing is indeed a monopoly in this scenario. But you ignore the fact that it becomes a fraction of existing equity money, so the effects are minimised. Obviously a proper governance structure would be needed to ensure that politicians cannot misuse the process.

        The Chicago Plan has a lot going for it and has little to do with whatever was subsequently spawned. See the IMF researchers’ paper on the Plan https://www.imf.org/external/pubs/ft/wp/2012/wp12202.pdf

        Your central tenet that it is Central Bankers who are the real bad guys isn’t really supported by the fact that private banks can create money above and beyond fractional reserve requirements as described by the Bank of England http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2014/qb14q1prereleasemoneycreation.pdf (ok, they’re a central bank, but they do show the modern money creation process and display the fact that central bank policy has limited power compared to banks themselves).

        IMO, one of the benefits of an equity money system is that it doesn’t require constant growth to remain healthy, which is the case for the current system. I disagree with your assertion that paying money back just recirculates it (as do the BoE). This is why when banks reduce available credit it has such a drastic effect on money supply (something mitigated by the likes of the Chicago Plan).

        • Please provide an example of when US commercial banks as a group have “reduced available credit” without the “guidance” (and influence) of the Fed. We are always eager to learn.

          And here, another statement of splendid innocence: “Obviously a proper governance structure would be needed to ensure that politicians cannot misuse the process.”

          C’mon now. Please provide us with a SINGLE governance structure that has longevity. Please provide us with a SINGLE example of a politician that has not energetically and often successfully sought to “misuse the process.” You can start with the Constitution.

          And please don’t quote the Bank of England about the role of central banking. They have every reason to minimize their role and you’re only spreading the version they want people to believe. The Bank of England is one of the most powerful entities on earth. Commercial banks have little or no power compared to it.

          • DavidPenfold

            “Please provide an example of when US commercial banks as a group have “reduced available credit””

            Whenever there is a contraction of the money supply as part of the so-called business cycle it is a direct result of banks reducing availability of credit after a previous period of reckless lending. Central banks react to these changing circumstances, they don’t cause them.

            “Please provide us with a SINGLE governance structure that has longevity.”

            The Fed. And it’s not pretty. I agree that this is the one element of equity banking that needs to be set in stone. The Money Masters had a good page on how to make this an equation based on population and a smidgeon of inflation (taking the whole thing out of the hands of politicians). I agree that politicians do whatever they can for short-term gain, so can’t disagree with you on this.

            However, the current system is far worse due to the intrinsic issues with debt-based money creation.

          • “Whenever there is a contraction of the money supply as part of the so-called business cycle it is a direct result of banks reducing availability of credit after a previous period of reckless lending. Central banks react to these changing circumstances, they don’t cause them.”

            This is an astounding statement. You really believe that central banks don’t cause business cycles? Have you read any Austrian economics at all? Start with Rothbard. He’s easy to understand, unlike Keynes and Friedman.

            As for the Fed, from a historical standpoint, it has changed a good deal. It is nothing like what it started out as. Government structures change all the time. They are simply a means to an end for mostly unscrupulous people.

            Finally, debt-based money is not an issue. In a competitive market without a monopoly central bank people could choose to use whatever money they wanted. And people could issue whatever kind of money they liked. Competition would eradicate the manipulation. The problem is monopoly money printing supported by the threat and the force of the state.

            The problem of modern money is its monopoly. Nothing else.

          • DavidPenfold

            Given over 90% of money is created by private banks (see BoE document above) they have far more influence on available money and hence business cycles than central banks (who until recently have just tried to use interest rates to set policy).

            I don’t disagree with what you say about the Fed. It’s an insidious cuckoo in the nest, serving the interests of the very bankers I’m talking to. Given that, I think you have the targets back to front. The bankers pull the Central Banks’ strings in their own interests.

            And, again, as the BoE states:

            “Another common misconception is that the central bank determines the quantity of loans and deposits in the economy by controlling the quantity of central bank money — the so-called ‘money multiplier’ approach. In that view, central banks implement monetary policy by choosing a quantity of reserves. And, because there is assumed to be a constant ratio of broad money to base money, these reserves are then ‘multiplied up’ to a much greater change in bank loans and deposits. For the theory to hold, the amount of reserves must be a binding constraint on lending, and the central bank must directly determine the amount of reserves. While the money multiplier theory can be a useful way of introducing money and banking in economic textbooks, it is not an accurate description of how money is created in reality. Rather than controlling the quantity of reserves, central banks today typically implement monetary policy by setting the price of reserves — that is, interest rates.

            In reality, neither are reserves a binding constraint on lending, nor does the central bank fix the amount of reserves that are available. As with the relationship between deposits and loans, the relationship between reserves and loans typically operates in the reverse way to that described in some economics textbooks. Banks first decide how much to lend depending on the profitable lending opportunities available to them — which will, crucially, depend on the interest rate set by the Bank of England. It is these lending decisions that determine how many bank deposits are created by the banking system. The amount of bank deposits in turn influences how much central bank money banks want to hold in reserve (to meet withdrawals by the public, make payments to other banks, or meet regulatory liquidity requirements), which is then, in normal times, supplied on demand by the Bank of England. The rest of this article discusses these practices in more detail.”

          • It is simply an incontrovertible fact that the Federal Reserve could shut down the businesses of every single commercial bank in the US if it wished to. The Fed is the regulatory body of banking and the arbiter of the money supply. You simply cannot argue these points. Repetition in this case is not reality. Sorry.

            As for the BoE, it is mostly a spurious source as we’ve already pointed out. However, your quote does point out the following, which further explains the reality we’re trying to communicate:

            “Banks first decide how much to lend depending on the profitable lending opportunities available to them — which will, crucially, depend on the interest rate set by the Bank of England.” Note the word “crucially.”

            Also the word “money” that you are using actually refers to “credit.” The modern money system is a CREDIT BASED system. And central banks have ultimate control over that credit. Please read Rothbard. You seem interested in these matters. You probably would enjoy him.

          • DavidPenfold

            The Fed could shut down the banks, but let zombie banks survive after 2008 (with one sacrificial lamb) because they serve the interests of their masters.

            “”And the word “money” that you are using actually refers to “credit.” Quite. They’re synonymous for the vast majority of broad money. I’ll have a look at Rothbard, thanks.

            But I’m not (currently) convinced that Central Banks are the sole source of current monetary evil, given that they were conceived by the bankers who pull the strings behind the scenes. And dismissing the BoE report seems more an act of faith than anything else.

          • Thanks for the civil discussion and for reading DB and responding at length in feedbacks.

    • Bruce C.

      Where did you ever get the idea that a central bank creates equity-backed currency? Not at all, unless you want to call the ownership of a liability an asset/equity.

      A central bank (being “a lender of last resort”) effectively lends “money” into existence by exchanging it for a bond – which is a claim on the borrower who receives the newly created currency. That’s it.

      In theory that system can work but in practice it doesn’t because there are no inherent, objective constraints on the money creation. Since the “money” created is literally just binary digits or printed paper or stamped coins there is no natural constraint on the currency. Furthermore, because the currency is “counterfeit” and unlimited in supply, any amount can be loaned out to fund just about anything (famously wars and government entitlements) without requiring the permission of the citizenry or the financial markets. That’s how countries like the US end up with an official national debt of $20 trillion (and an unofficial one of “unfunded liabilities” in the hundreds of trillions.)

      On the other hand, if there was no central bank (lender of last resort) then all such money would have to come either from regular banks (that would be created by fractional reserve) or the existing money supply via investors. Fractional reserve lending/currency-creation is potentially a problem too (as Iceland realizes) but not if the banks and their “investors” are held accountable.

      • DavidPenfold

        “Where did you ever get the idea that a central bank creates equity-backed currency?”

        I never suggested that. However, the Icelandic proposal does.

        “In theory that system can work but in practice it doesn’t because there are no inherent, objective constraints on the money creation. ”

        If you look at the transition process (e.g. in the IMF document) towards an equity-based system you will see that the vast majority of equity comes from moving fractional reserves to 100% reserves. The money creation process has far less of an impact than in the current system due to money constantly being needed to be created after the principal is destroyed on repayment (leaving the interest as debt with no corresponding asset). This entails a requirement for continuous growth for the current system to function correctly and constant creation of credit to maintain the money supply, but that’s not easy on a finite planet.

        • Bruce C.

          Okay but you seem to be mixing the way the two systems work. If a regular bank lends out only what deposits it has (“100% reserve lending”) then there would be no increase in the “money supply”, unless by some other mechanism. In theory that would lead to price deflation (!!!) (or a “strengthening” currency) because of increased demand if/when the economy “grows”.

          In any case, how Iceland switching to a central bank as the source of money supply is better – or would not involve securitization – escapes me.

          As the DB said – indirectly – is that at least one alternative for legal tender is needed to avoid the same problems. That’s what the US had after Brenton-Woods (and probably why the rest of the world accepted it). Gold was effectively an alternative to the Federal Reserve Note (aka, “US dollar”) until Nixon closed the “gold window.” It almost worked to discipline the US profligacy, but then came the “petrodollar” agreement – which I have to admit was brilliant.

          • DavidPenfold

            In an equity-based system, banks never increase the money supply. The treasury (or central bank) does that.

            Lending institutions would use existing equity that individuals or companies are prepared to risk (where banks are no longer lending institutions). The pool of existing equity would be very large compared the current system, so lending could easily use existing equity.

            Here’s another example of the transition process (the original Icelandic proposal on sovereign money). It’s an interesting read https://www.forsaetisraduneyti.is/media/Skyrslur/monetary-reform.pdf

            I’m not a fan of precious-metals based money due to potential foreign manipulation of supply.

          • Bruce C.

            Okay, I’ll read that link.

            In the meantime, foreign manipulation of supply really can’t be a problem because the gold/PMs already exist. It doesn’t matter if they’re in one vault or another. However, if there were such a transition it would be volatile at first because so much gold would start “appearing”. Only about 20% of the total refined gold on the planet is owned by central banks – supposedly, and that’s the big question. If gold skyrocketed in price a lot of jewelry and jewler-owned and investor-owned gold would become “liquid.” Not until the true amount was known would its price settle.

            The real problem is when paper/digital currency becomes a proxy for gold. That’s when the manipulations can start.

            Even more fundamentally is the integrity of society. If “everyone” is a snake – if the system is run by the corrupt – then no monetary system or much else is going to work very well.

          • Bruce C.

            Okay, I didn’t read every page but I read the important parts and basically have the same issues. Iceland’s central bank will be “state owned” unlike, say, the Fed which is private and it alone will control the money supply so all regular/commercial banks will have 100% reserve lending. However, the belief seems to be that a collection of individuals will be able (in fact, better able) to know how much the money supply should be at any given time and to set interest rates “properly.” Why the market can’t decide on the “price of money” (i.e., interest rates) is beyond me. Similarly for the money supply itself.

            How many different ways people need to try centralized control is amazing to me. I think its a mass psychological issue, probably having to do with mistrust of the Self, and by extension “free markets.” I predict zero net change in Iceland’s monetary system if they try this, although I’m sure the details will vary.

          • DavidPenfold

            I agree entirely about the risk involved. The Money Masters website is down, but they had a great Monetary Reform Act page where the proposal is that money creation be based on a formula (except in wartime).

            I’m not sure how private banking interests represent the economic needs of society as a whole though. Being private is irrelevant. It’s a question of their interests not being aligned with the rest of the economy (and including money creation with credit).

          • dave jr

            It is a basic human fault to believe one can get something for nothing without any repercussions. When governments or banking institutes promise it, the unwashed masses line up.

          • DavidPenfold

            Don’t forget that the idea of Chicago Plan-style systems is to address what are considered four major issues with the current system (it was drawn up after the 1929 crash). https://www.imf.org/external/pubs/ft/wp/2012/wp12202.pdf

            “Fisher (1936) claimed four major advantages for this plan.

            – First, preventing banks from creating their own funds during credit booms, and then destroying these funds during subsequent contractions, would allow for a much better control of credit cycles, which were perceived to be the major source of business cycle fluctuations.

            – Second, 100% reserve backing would completely eliminate bank runs.

            – Third, allowing the government to issue money directly at zero interest, rather than borrowing that same money from banks at interest, would lead to a reduction in the interest burden on government finances and to a dramatic reduction of (net) government debt, given that irredeemable government-issued money represents equity in the commonwealth rather than debt.

            – Fourth, given that money creation would no longer require the simultaneous creation of mostly private debts on bank balance sheets, the economy could see a dramatic reduction not only of government debt but also of private debt levels.”

            The IMF report then goes on to validate that these issues are indeed resolved by an equity-based system. But it does have the inherent risk of politicians messing with it.

        • dave jr

          You seem to be fixated on the unpayable portion, the interest, which needs to be market driven. True, this unpayable portion will cause default, which is supposed to be recycled back into the economy through public auction. It isn’t a bad thing. Not every venture can be successful, nor any venture capitalist be successful all the time. The market will naturally sort out the winners and losers by supply and demand. Do you really want instituted governments to interfere and call out winners and losers by their dictate? That is not a world I want to live in, under a sovereign dictatorship. Maybe you are comfortable with that, but I am not. Next, you will have to prove how my stance is hurting or taking away from you, your efforts. I can easily prove how your stance is taking away from me. Fair game?

          • DavidPenfold

            I’m not fixated on it. It’s an issue in that it requires constant debt-based money creation. My main gripe is that money creation is currently linked to credit (and this is done by far the most by banks). It’s dangerous because their interests are not those of the wider economy. And given they are so important to the economy, Goverments tend to bend over backwards to ensure the money supply doesn’t dry up. It’s anything but a free market.

            We need to separate lending from money creation, IMO. And this is the case in equity-based systems.

          • dave jr

            “requires constant debt-based money creation”

            Yes, the over lording of any monetary system requires the expansion (independent of market need) for their own control.

            Your solution is to give in to one over lord over another, who seem to be working in tandem.

            We agree on an equity based system. Historically, did the free market not provide that?

            I’m curious, do you believe that governments are the source of equity?

          • DavidPenfold

            You appear to have missed the point that equity money is generally not destroyed (unlike bank-delivered debt-based money) so the expansion of the money supply becomes a progressively less important element of overall money supply with time (unlike the current scenario).

            No, it’s not ideal. Governments will make a pig’s ear of most things they touch. But in principle it’s less of a risk than the current setup (which is a basket case).

          • dave jr

            I don’t think I missed any point. Government borrowing and not repaying (rolling national debts) is the greatest contributor to monetary expansion. When this expansion out grows and overcomes market needs, as it inevitably always does, there is trouble. Governments throughout the world have demonstrated they can not live within their means (tax collections). So why in the world would anyone agree to work their asses off trying to satiate a power addiction? Then throw in the reality of an inherited opportunity for unmitigated corruption and the concept falls dead just two steps out of the starting gate.
            1. market created money – not perfect due human nature
            2. monopoly bank created money – worse yet
            3. government created money – armageddon, here we come

          • Bruce C.

            For example, the US national debt is $20 trillion which means there are 20 trillion more US dollars in the world than there “should” be, at least from a disciplined budgeting standpoint.

            BTW, maybe you can answer this (I haven’t studied it yet): Where in the US Constitution does it explain how the Federal government is limited in its ability to increase the money supply? Is it implied by all US currency to be coined PMs? I know banks weren’t ever supposed to have that power, but what was supposed to be the check on the Fed gov’s power?

          • dave jr

            The people and their business determined the money supply. All that Congress was to do was define the dollar (regulate the value thereof) and the Treasury was to coin any bullion supplied by the pubic for a nominal fee. Government under the Constitution was never authorized to regulate the money supply. That power was usurped by the monopolist bankers with the help of government regulation supporting their monopoly quest.

          • DavidPenfold

            You are mistaking banking created debt-money for market created money. It’s as contrived as any money creation process and has nothing to do with free markets. Witness their monumental bailouts after they became too reckless. Also see my post below for the four main benefits of an equity-based system. I accept that it isn’t perfect due to the risk of political manipulation (so whatever system is dreamed up has to be robust), but the benefits are huge (and money creation becomes less of a factor overall when existing money is equity, meaning money creation becomes a smaller fraction of existing money).

          • dave jr

            After all I have said, I am being pinned for “mistaking banking created debt-money for market created money”.
            I give up.
            BTW, you haven’t answered my question. Do you believe governments are the source of equity?

          • DavidPenfold

            To be fair, you created your hierarchy of badness based on it being “market created money”.

            Governments are not currently a source of equity as they borrow money into existence just like corporations and individuals. Only banks and central banks can create money (as debt for Governments, corporations and individuals).

          • dave jr

            I don’t follow this “hierarchy of badness”.
            Corporations and individuals have to put up collateral (equity). Corporations and individuals have to repay their debt or lose their equity to the system. Corporations and individuals have credit limits based on their earning power. None of this relates to governments. Yet, you want to attribute all earning power to governments. I’ll reserve my opinions of those with such thinking.

          • DavidPenfold

            The mechanism is the same though. All money is created as debt for corporations, individuals and governments. All are supposed to be able to pay it back.

            As I’ve already stated, I’m wary about giving Governments this power, hence the need for a formula-based increase in money supply (just not as debt, but as equity).

            And don’t forget that at the moment the equivalent of all personal income tax in the US is used to pay of current Govt. debt. This isn’t because Governments are bad, but because in the current system overall debt continues to grow over time. It has to, as once the principal is paid off, there is still the interest debt that needs to be paid off with yet more debt-created money (with yet more interest). If Governments tried to set a balanced budget, it would negatively impact general broad money availability (in the same way that if corporations or individuals decided not to take any more debt the money supply would contract).

            So, if money weren’t created as debt, the equivalent of all personal income tax in the US would no longer be needed to pay off Government debt to banks and central banks (that can create it from nothing). Overall debt would massively decrease. See the four main issues with the current system that I pointed out below.

          • dave jr

            Well, I refuse to be thrown in the same tub grinder with government debt. I am better than that.

            Trading government debt for sovereign economic power over the individual is no bargain. So as long as you excuse the means for government growth in imperial power, I’ll have to politely bow out. Thank you for the discussion.

          • Bruce C.

            What’s so perverse is the banks “earn” money by lending “money” that not only isn’t theirs but doesn’t even exist. Roughly 95% of the money loaned out is newly created via double-entry book keeping so the interest they charge on their loan is really just based on 5% of the principle. That means their actual interest rate is 20 times what they advertise because 95% of the principle is not a real liability to the bank. Now, I’m not saying that’s usurious – or at least that’s not my gripe – but the fact that “real” interest is charged on “unreal” currency is why the fractional reserve banking system requires a roughly 2% per annum increase in the money supply which is expressed in terms of price inflation. If you’ve ever wondered why the Fed/CBs keep saying we need 2% price inflation each year, that’s why.

          • dave jr

            I’ll agree with that. So lets get rid of monopoly central banking and let interest rates float in an open market. During slow business cycles market interest rates might be .25%. During heated economic activity, market interest rates might rise to 10%. Let it be and it is self regulating. No over lords need apply. And let government live within its means. no debt, albeit bearable tax collections, which it has to enforce, payable out of… tax collections.

      • Hi Bruce. I’m writing to you because what you write here implies you already understand how some of the basic concepts we are taught are false, and the
        Daily Bell seems to be unable to get past THEIR preconceived notions
        enough to understand. My last attempt was the following: The first fiat
        currencies had to be measures of the value of goods. You bring me this much goat’s milk, eggs, stitched clothing, whatever, I have to give you some good or service equivalent. Fiat currency made it possible to have a representation of the value of that. Now in that society, if the stitched clothing, eggs or milk became scarce, would the currency have risen or fallen? No, it would cost more of it to but something scarce. Why? Because the currency measures the value of ALL the goods in the market. The GOODS fluctuate, but the currency is the stable constant against which the value of those goods are measured. Even adding all the complex stocks, bonds, derivatives etc. of today would not change that relationship.

        This is an essential insight because it opens the door to so many others. First of all, that money wasn’t loaned. It was an excellent way for me to pay you now for something you did. But how did I get the money to pay you in the first place? If you had to work producing eggs, milk and clothing to get moneyand I printed my own whenever I wanted, I’d be dead the instant you andyour fellow workers figured out I was doing this. Well, that is what the Fed is doing. They didn’t work like us to earn the money, yet they are lending it to us.
        ??????
        This is what I mean when I say everyone starts in the middle of the argument. They all start at the point AFTER the money is somehow “generated”. It isn’t “generated” in the sense this implies. It is PRINTED in order to pay us for the goods and services we produce and you have to stop there and take account without subscribing to any existing or accepted theory, because these are important insights into the nature of money itself. If you believe that government or ANY agency “generates” the money, then they have full control over it. The only real points of fiat currency is that it
        REPRESENTS AND MEASURES the value of goods and services in the way that a scale represents and measures weight. This is easy to lose sight of
        because stealing the money will gain you its value whereas stealing a scale only gains you a measuring device, but the principles still hold and
        are still fact. This also gets confused because we know that $ = value
        in society. But these are not forces of nature or physics governing any
        of this. It isn’t photosynthesis that makes one’s 401k grow. It isn’t
        the strong or weak nuclear force causing a CEO’s salary to escalate.
        They are not natural forces of the market either. The Daily Bell tried
        to tell me it was the surplus B4 the Great Depression that caused it,
        but this makes no sense, because that ceased to be a problem immediately
        after the stock market crash. We KNOW that the banks colluded to shrink
        the money supply and that this is what SUSTAINED the GD throughout the
        ’30s. How can the over-printing of currency available decrease the
        value, yet the shortage not increase it? Everyone fails to answer this
        question. Even if the daily bell were right about what happened B4 the
        GD, it would have had no effect DURING it as that money wasn’t there in
        the ’30s TO affect things. It cannot BE both ways. Either the shortage
        HAD to cause the currency’s value to increase, or the over-printing
        CANNOT decrease the value. Either one or both of these situations have
        to be direct manipulations because they cancel each other out, and any
        theory that tries to EXPLAIN it that I’ve read only succeeds in
        DESCRIBING it. That is not the same thing.
        I will only confuse the issues by getting into more, but those insights are key and everything has to fall from them. Markets and lending do NOT form the basis of a healthy economy, they only represent activity and provide a control of it to the wealthiest people in it and we have to break that down or they will bring us continued poverty.
        I’m hoping you can understand that the rules we think are GOVERNING
        everything are just manipulations. We can remove all of them and have a
        functioning system because they have nothing to do with the economy.
        They only are ways of funneling money to the already wealthy.

    • Hi David. I’m writing to you because of what you write here, and the Daily Bell seems to be unable to get past THEIR preconceived notions enough to understand. My last attempt was the following: The first fiat currencies had to be measures of the
      value of goods. You bring me this much goat’s milk, eggs, stitched
      clothing, whatever, I have to give you some good or service equivalent.
      Fiat currency made it possible to have a representation of the value of
      that. Now in that society, if the stitched clothing, eggs or milk became
      scarce, would the currency have risen or fallen? No, it would cost more
      of it to but something scarce. Why? Because the currency measures the
      value of ALL the goods in the market. The GOODS fluctuate, but the
      currency is the stable constant against which the value of those goods
      are measured. Even adding all the complex stocks, bonds, derivatives
      etc. of today would not change that relationship. This is an essential
      insight because it opens the door to so many others. First of all, that
      money wasn’t loaned. It was an excellent way for me to pay you now for
      something you did. But how did I get the money to pay you in the first
      place? If you had to work producing eggs, milk and clothing to get money
      and I printed my own whenever I wanted, I’d be dead the instant you and
      your fellow workers figured out I was doing this. Well, that is what
      the Fed is doing. They didn’t work like us to earn the money, yet they
      are lending it to us.
      ??????
      This is what I mean when I say
      everyone starts in the middle of the argument. They all start at the
      point AFTER the money is somehow “generated”. It isn’t “generated” in
      the sense this implies. It is PRINTED in order to pay us for the goods
      and services we produce and you have to stop there and take account
      without subscribing to any existing or accepted theory, because these
      are important insights into the nature of money itself. If you believe
      that government or ANY agency “generates” the money, then they have full
      control over it. The only real points of fiat currency is that it
      REPRESENTS AND MEASURES the value of goods and services in the way that a
      scale represents and measures weight. This is easy to lose sight of
      because stealing the money will gain you its value whereas stealing a
      scale only gains you a measuring device, but the principles still hold
      and are still fact. This also gets confused because we know that $ = value in society. But these are not forces of nature or physics governing any of this. It isn’t photosynthesis that makes one’s 401k grow. It isn’t the strong or weak nuclear force causing a CEO’s salary to escalate. They are not natural forces of the market either. The Daily Bell tried to tell me it was the surplus B4 the Great Depression that caused it, but this makes no sense, because that ceased to be a problem immediately after the stock market crash. We KNOW that the banks colluded to shrink the money supply and that this is what SUSTAINED the GD throughout the ’30s. How can the over-printing of currency available decrease the value, yet the shortage not increase it? Everyone fails to answer this question. Even if the daily bell were right about what happened B4 the GD, it would have had no effect DURING it as that money wasn’t there in the ’30s TO affect things. It cannot BE both ways. Either the shortage HAD to cause the currency’s value to increase, or the over-printing CANNOT decrease the value. Either one or both of these situations have to be direct manipulations because they cancel each other out, and any theory that tries to EXPLAIN it that I’ve read only succeeds in DESCRIBING it. That is not the same thing.
      I will only confuse the issues by getting into more,
      but those insights are key and everything has to fall from them. Markets
      and lending do NOT form the basis of a healthy economy, they only
      represent activity and provide a control of it to the wealthiest people
      in it and we have to break that down or they will bring us continued
      poverty. I’m hoping you can understand that the rules we think are GOVERNING everything are just manipulations. We can remove all of them and have a functioning system because they have nothing to do with the economy. They only are ways of funneling money to the already wealthy.

  • Bruce C.

    I don’t understand why Iceland’s government (and the author of the article) think that there is any fundamental difference between the two forms of money creation, especially if they think the bane is securitization. That’s precisely how central banks do it – usually by issuing bonds in exchange for the currency in circulation.

    It’s a little hard to believe they don’t understand that (though arrogance does not imply knowledge, and if a journalist knew as much “he” probably wouldn’t be a journalist…but still.)

    • dave jr

      The ‘bane’ of securitization is crucial for sound money, crucial for a sound economy. The question is, shall markets be responsible as it naturally is, for dealing with corruption within; or are government bond securitizations a better avenue? Given the track record of corruption within hired governments should offer a clue. We don’t have to speculate who or what pays the average ‘journalists’ wage.

      • Bruce C.

        We also don’t have to speculate who educates them.

        Anyway, I’m not exactly sure what Iceland’s gripe is about “securitization”. It could be a euphemism for “the tyranny of gold” rant, or it could be the recurring problem of investment “ratings” mispricing risk, or something else.

        Whatever. I would generally vote for “market” solutions, but the problem is “the market” isn’t always rational nor are its rules/laws always known by all. One big reason there aren’t more “white collar” convictions is that many of the laws are so nonsensical or biased or whatever that “obvious common sense” crimes are actually not illegal.

        That seems to be what’s coming out about the political parties’ rules shenanigans. “Establishment” types say the rules are the rules and thus no foul, and “the rest of us” say…well, those rules suck and are “unconstituional” at least in spirit, etc.

        Don’t mean to change the subject but – hey – it’s a slow day.

        • dave jr

          Don’t confuse market rational for law. Free to associate or not is the primary rule.

  • Samarami

    The issue is religious faith — pure, unadulterated superstition (if indeed superstition can be anything but adulterated). From the article:

    “…These sorts of suggestions are terribly sad.
    They confuse people about what is money
    and how society can best be organized to use it…”

    If I have something of value you want, and you have something of value I want (more than I want my item[s] that you want), an exchange can be made. But we must first somehow know or be aware of each other, and be in proximity, for that to take place. Thus media of exchange.

    Who, what, is “society”? Think about that for a moment. Because once you can be persuaded to think in terms of brainless abstractions (societies and countries and villages and nations and rulership [politics]), it is not so difficult to “…organize…” you and your family and your neighbors and friends and folks up and down the road; and to steal your production and your resources. That is the history and the nature of “the state” — and the only agenda of those psychopaths who hide behind and run for elections within “it”. The wars and the police brutality and the depressions and the terrorism and other “issues” (trans-men in girls’ bathrooms, et al.) are distractions to keep you from seeing the bad wizard.

    Abstain from beans, my dear friends. Sam

  • kevincote

    The banking cartels should all be bankrupted and liquidated, all principals( Rothschild, Rockefellar…) held personally liable for the theft and the entire world should be on the gold/ silver standard with fractional lending outlawed and hypothecation a capital crime… That is how we got here , making something out of nothing and then exponentially multiplying the nothing to make vastly more nothing. THis is a Lucifarian plan to enslave the planet. Bring Law of the Land back to the Land and Law of the Sea( special Admirality Law, UCC, Statuatory Law ) the HELL out of our lives… Find out what they have done There are several sources to research.. Annavonreitz.com is but one . Find out about your ” political status ” and how you have been enslaved and defrauded since birth as ” chattel ” for the central banks to buy, sell and trade you , your offspring and your labor to create all this ” money ” in a facsimile of tour name … Please take this to heart and wake the world up to the fraud and semantic deciet these bastards have done.

  • Marco Saba

    Most commentators forget to tell that the point is how do you account for money creation. A fiat money with no real liability associated – because it is irredeemable – must be accounted as an asset in the cash flow account at the time of creation before being spent or lent out. In accounting terms CASH is: coins, banknotes AND deposits (the same as in the definition of the M1 aggregate). By removing the ASSET quality of that money the bankers are appropriating the seigniorage on the principal (capital). In a 100% sovereign nation, the money created by banks should be an asset for the bank and a corresponding liability to the Treasury. I.e. the Treasury should write in his books an entry corresponding to the 100% seigniorage on the capital creation received from the banking cartel as an asset – and a liability to the public of the same sum.
    The difference from the government earning this seigniorage is that the government shall respond politically to the public of the sum involved while bankers do not.
    You have to read this paper to understand the accounting point: Cash Flow Accounting in Banks— A study of practice, Ásgeir B. Torfason, University of Gothenburg, 2014
    https://gupea.ub.gu.se/handle/2077/35272

    This problem is so important that the Swiss central bank this year suppressed completely the CASH FLOW STATEMENT from her annual report, here: Torfason-Syndrome*: the Swiss central bank suppress the cash flow statement
    http://leconomistamascherato.blogspot.it/2016/04/torfason-syndrome-swiss-central-bank.html

  • That conclusion is partly right: the problem isn’t who is lending the money. But the solution isn’t who prints it either. You are all conflating the printing of the money with “generating” it. You all think that some institution has to “lend” money into the system, and you all seem to think this because, as G. Edward Griffin and many others say, it seems wrong that institutions can print money out of thin air. Well d-uhh Mr. Griffin; It doesn’t grow on trees. It has to be printed, and paper doesn’t grow its own ink. Unfortunately, he makes the same mistake the rest of you make, conflating the printing of the currency with owning it. Let me run some questions by all those reading this: before the money printed to pay you and everybody else in the country for next month’s work is printed, who owns it? It can’t be owned B4 it was PRINTED could it? No. It couldn’t. Okay, so then it must become owned by the Fed at some point AFTER it is printed. Okay. So the new money is printed, then becomes the Fed’s to lend to us.
    … Except HOW? How exactly does the Fed come to own that money? You and I have to work to get any of it. But the Fed is simply granted theirs? By virtue of WHAT exactly? Anyone?
    Oh, I KNOW that the federal government issues a bond for the amount, but that’s simply rhetorical nonsense because that is the agency used to borrow it from the Fed, but it does nothing to answer the question of how the Fed comes to own it. I can lend you MY money because that is what lending is. It presupposes that it is mine to lend. But the Fed doesn’t own the money it prints, it owns maybe the paper and ink used to print it and perhaps the presses. It doesn’t “issue” or “generate” money, just prints it.
    Griffin and all have it wrong because they are working from a false premise to begin with, that money doesn’t exist, therefore needs to be loaned by some institution. Except how does the institution get the money to lend?
    Does anyone see this error in logic? You are all saying the money needs to be loaned into the system because it doesn’t truly exist. D-uhh to the second part, but the first contradicts itself. If money needs to exist before it can be loaned, then how does the Fed COME TO OWN IT?
    That money they print is what you and everyone you know earns through their life’s labors. Do you mean to tell me that if Kinko’s won the contract to print the money you earned, you’d owe Kinko’s back every penny you ever worked for plus interest? They have the technology now to do it. So because the print job was for currency we’d owe them for the currency and not for the print job?
    Wanna run that by me again?
    You guys have put the cart out there with no horse. The money isn’t the Fed’s to lend out. They are performing a print job and it no more costs $1.00 to print a one than it costs $1,000.00 to print a one thousand dollar bill. It isn’t a question of who lends you that money because it’s your money! You produce the goods it is printed to pay for. It doesn’t need backing by gold because it is fronted by the goods and services YOU provide. The banks never owned any of it.
    The whole thing is a fraud up and down the entire system. But since most of you are too stupid to understand that, I’m applying for the job of “currency printer”. That way you’ll owe ME all the money you earn.

    • Money is what people want it to be. Among other things, it is has been gold and silver PRIVATELY CIRCULATED for thousands of years. Absent money monopolies and state force, it would be again.

      • Again: partly right. Gold and silver ARE money in the same sense that milk and eggs are. As well as leather canned goods, knitting needles…
        You are still conflating money with what people say money is. You are staring the argument in the middle. A thousand years ago, the fiat currency a trader picked up in one location would be useless in the next. This is where the original concept of the “Gold Standard” comes from, because unless there was somebody willing to take the currency from Baghdad Iraq and exchange it into gold, it would be useless when the trader came to Damascus Syria. Why? Well in 1993 $10.00 CDN was about 4,000 Italian Lira. Not every good that went to both places cost that 400 to 1 difference as more things grew in Italy than Canada. A thousand years ago, there would be no way to convert your Iraqi Dinars or whatever into Syrian Drachmas or whatever. Today, I can go to an island I never heard of and convert all the money I forgot to before leaving because an exchange counter will be at the airport or dock.
        Money isn’t currency or the goods they’re exchanged for either: It is THE REPRESENTATION OF THE VALUE OF GOODS AND SERVICES. This is hard for people to understand for some reason, even though it is obvious. Instead of figuring out how much goat’s milk needed to be exchanged for how many chicken eggs, fiat currency measures the value of ALL goods in the market against that one measure, itself. Cowrie shells and tally-sticks is what fiat currency is. It’s a receipt so that they don’t have to raise goats and chickens at the factory where you work, and then you’d have to be careful not to spill yours on your way to the bar after hours. That’s all fiat currency is, a series of receipts that keep track of what you’ve earned. They represent the value of those eggs and milk you earned and circulate in their place so that you can work a job that doesn’t produce food and get paid in something you can exchange FOR food. That’s literally it. All the talk of the gold standard is meaningless because the money is printed TO PAY US FOR THE WORK WE DO. That’s why I say it’s our money: it is.
        Let me put this another way: if the $ will become devalued strictly because it is over-printed, then the opposite must also be true: the value of the $ MUST go up when under-printed. Cause and effect, right? Except, the Great Depression could never have happened if the currency were itself a good produced because its value would have SOARED when the Rockefeller-owned banks colluded to shrink the money supply, as we now know was THE cause of the GD, not the market crash of ’29. There would have been nothing they could have done to stop it just as there is nothing that can be done now to stop the inflation from over-printing it. Except, the Great Depression DID happen precisely because $ aren’t a market-based product. It is a representation of the value of market-based products. Gold doesn’t go up or down based on the number of scales produced to weigh it, and vice versa. By the same token, no matter how many sectors of how many economies take hits, the $ has to be able to value these things in $: in other words it MUST remain stable against the value of the goods it measures. This is why we don’t adjust the scales to the price of gold: scales weigh apples, ground beef and silver as well. The $ doesn’t fluctuate any more than how much an ounce weighs fluctuates, because it is the yardstick for monetary value. Would England have suffered an economic meltdown from too many tally-sticks? Do you know how ridiculous that sounds?
        There is more to this than just this, but try just that second-last sentence. Saying the $ loses value from there being too many in print is PRECISELY THE SAME THING as saying too many tally-sticks would have brought down the economy. EXACTLY THE SAME THING. Also, of it were true, then explain the Great Depression having occurred and not causing the $ to skyrocket in value. It not only didn’t skyrocket: it didn’t budge at all.
        One way or another, the system is a total sham. Either the loss of value from over-printing is a sham, or the Great Depression was, or both: but both can not have been outcomes of natural processes. That is IMPOSSIBLE. Either one or both HAVE to be caused by manipulations of facts, and either one would mean the entire premise of what they tell you money and/or fiat currency is is an utter sham. You know your stuff. Come on all you economists: here is a challenge worthy of all of you PhD’s and Masters degrees: PROVE ME WRONG, SUCKERS!!!

        • You seem very passionate about something but it is a bit difficult to understand what. We would suggest you read some Austrian economics to broaden your arguments a bit.

          Rothbard already showed us that it wasn’t the tightening, as you seem to believe, that caused the Depression but the initial overprinting that raised valuations to absurd highs. Also, gold is money. And contrary to what you seem to believe, it is not merely a representation of value but has been valued by itself for thousands of years. Silver too.

          • Yes, I have read them, and no they haven’t rebutted me. They just start the argument in the middle again. And you did as well. The money supply HAD shrunk during the Great Depression. That is established fact. If the highs before existed before, they didn’t exist during the ’30s. I am NOT saying gold and silver aren’t money, so they can’t be rebutting that. I AM saying that the fiat currency is NOT a market-based commodity, but a measure of the value of things in the market. As a scale is to weight and yardstick is to length, the fiat currency measures the value of goods in the market in dollars, Euros, whatever the currency is called because it REPRESENTS the value of those goods.
            Yes, you CAN go back to paying people in gold and silver. Beyond how are you going to make change for your ounce of gold when you buy a cup of coffee anywhere but Starbcuks who charge almost that much, how is your boss going to get the gold to pay all his employees with? Going back to gold and silver will CAUSE the depression, not be its effects.
            Just do it simply. Stop with what different economic theories SAY. They are after all theories and economics is at best a pseudo-science anyway. What if instead of nations we had tiny units that would not need currency to measure out the wealth. Say a unit of no more than 400 working adults making an average of US $75,000 a year. $30 million printed, right? Now if I was the only one printing the currency, they would all owe me the money right? Because I’d be the one “loaning” it in.
            I’d have 399 other working adults outside my door with torches and pitchforks because when you put things on that small a scale, you see how utterly ridiculous this all is. The money is no more mine for printing it than it is the security truck driver’s for delivering it to the machines that spew it out to you on demand, or than it belongs to the janitor’s for cleaning the floors of the presses. You have to start there, with how the money is generated, and Rothbard starts with the same presumption that money both doesn’t come out of nowhere, yet somebody is simultaneously loaning it. If it can’t come out of nowhere, how is someone getting it to loan?
            Then the issue of money in circulation versus value. In this unit where thirty million is all that was needed to pay everyone for all that they did, what would happen if twenty or forty million was printed instead? They would have to get paid more or less? That money wouldn’t even have to enter into circulation if too much were printed, and if too little, then print the rest. The economy suffers from a lack of ink alone?
            Money CAN be anything, but nobody “generates” it. You get paid for WORK YOU DO. The Fed only PRINTS the currency. They loan none of it any more that Kinko’s would own it if THEY printed it.
            So, to simplify, currency is a measure of the value of goods, does not come pre-owned, is not loaned into the system and its value can NOT FLUCTUATE. Put aside Rothbard and look at the illogic of the newly printed currency belonging to ANYONE. It makes no sense. If MY money cannot come out of nothing, then NO ONE’S CAN, you see?

          • Reading back, I’m not being as clear as I’d hoped. This is probably covering new ground. I need to back up.
            The first fiat currencies had to be as I described: measures of the value of goods. You bring me this much goat’s milk, eggs, stitched clothing, whatever, I have to give you some good or service equivalent. Fiat currency made it possible to have a representation of the value of that. Now in that society, if the stitched clothing, eggs or milk became scarce, would the currency have risen or fallen? No, it would cost more of it to but something scarce. Why? Because the currency measures the value of ALL the goods in the market. The GOODS fluctuate, but the currency is the stable constant against which the value of those goods are measured. Even adding all the complex stocks, bonds, derivatives etc. of today would not change that relationship. This is an essential insight because it opens the door to so many others. First of all, that money wasn’t loaned. It was an excellent way for me to pay you now for something you did. But how did I get the money to pay you in the first place? If you had to work producing eggs, milk and clothing to get money and I printed my own whenever I wanted, I’d be dead the instant you and your fellow workers figured out I was doing this. Well, that is what the Fed is doing. They didn’t work like us to earn the money, yet they are lending it to us.
            ??????
            This is what I mean when I say everyone starts in the middle of the argument. They all start at the point AFTER the money is somehow “generated”. It isn’t “generated” in the sense this implies. It is PRINTED in order to pay us for the goods and services we produce and you have to stop there and take account without subscribing to any existing or accepted theory, because these are important insights into the nature of money itself. If you believe that government or ANY agency “generates” the money, they have full control over it. The only real points of fiat currency is that it REPRESENTS AND MEASURES the value of goods and services in the way that a scale represents and measures weight. This is easy to lose sight of because stealing the money will gain you its value whereas stealing a scale only gains you a measuring device, but the principles still hold and are still fact. I will only confuse the issue by getting into more, but those insights are key and everything has to fall from them. Markets and lending do NOT form the basis of a healthy economy, they only represent activity and provide a control of it to the wealthiest people in it and we have to break that down or they will bring us continued poverty.

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