How the banks create money

[respect]

Your source only provided part of the information - you expected me to do the rest of the research.

Still, if you want to claim all of the credit for this analysis, go ahead. It's a lot easier than speculating about how we will deal with the national debt.

Are you seriously trying to suggest that I have placed hardship on you by asking you to do at most a Google search? I have even shown you how to find the answer you seem to find allusive. I have even given you your answer. Is it any wonder that no one above the age of ten takes people like you seriously? You simply lack the intelligence to matter.

 

[psionl0]

Laziness on your part does not equate to a lack of intelligence on my part.

 

[drkitten]

Laziness on your part does not equate to a lack of intelligence on my part.

True. More relevantly, lack of intelligence on your part does not equate to laziness on his.

 

[respect]

Laziness on your part does not equate to a lack of intelligence on my part.

There was never any actual discrepancy, you just assumed the Fed owns a much bigger percentage of the debt than it does because you assumed it is buying the the congress's way out of debt. Your assumptions were wrong.

 

[psionl0]

There was never any actual discrepancy,

Already covered. You supplied incomplete information then took the lazy man's way out by questioning my intelligence when I asked for more information. Lack of information = discrepancy.

 

[drkitten]

Already covered. You supplied incomplete information then took the lazy man's way out by questioning my intelligence when I asked for more information. Lack of information = discrepancy.

That's a total and complete misrepresentation of what occurred. I'm used to goldbugs lying, but when the complete conversation is available upthread, I'd think you'd be a little more circumspect about it.

You wrote:

Details. Since the Fed buys most of the government bonds, the government is effectively printing money.

Respect (correctly) called you on this; the actual number that the Fed holds is much less than this (as you later admitted):

Since when? The last I heard the Fed held about 9% of US debt.

You then cited your number, which you yourself didn't understand:

The Fed owns almost 1/2 of US treasury securities. Source.

.... because, as respect pointed out, it lumps all intergovernmental holdings into one category. (That's like pointing to the population of California and suggesting that San Diego is the largest city in the world...)

Oh, sweet Jesus...it does not. That includes all government agency ownership. The Fed isn't even the biggest player there, Social Security is.

But apparently you didn't actually understand what your own source said:

If my source is incorrect then show us your source.

Your own source says that you are incorrect. What do you think it means by intragovernmental holdings?

So, now, you're put in the position of demanding that he explains your own sources to you.

I can't see anywhere in that link a statement showing what percentage of bonds is held by the Fed. The closest bit of info is that of the $2,503,981,000,000 assets of the Fed, $1,167,087,000,000 is held in treasury securities which is 51.25% of its total assets.

I.e. rather than going out and getting better numbers, you want us to do the work to prove YOU wrong, quite the reverse of what you suggested.


And even then, he pointed out the number(s) you need to look at.

Well of course not, it is a balance sheet. But it does give you half the information you need to determine how much of the US debt it holds in terms of percentage. The other half is the size of the debt. Look that up and do some basic division and you will see the percentage of US debt held by the Fed.

$1.2T is the amount of debt held by the Fed. The total US debt is a matter of public information; the idea that you'd be discussing percentage of total US debt without being familiar with that number indicates a certain amount of ignorance on your part. Even without looking it up, you should know that it's "around" $13-14T if you want to participate in this conversation at all. Knowing that, $1.2T is a little less than 10%.


You, however, chose to plunge heedlessly on:

I see, you want me to do the work you need to do to prove me wrong. I don't know if that is possible.

Well, it's not possible for you to do the work to prove respect wrong, since respect isn't wrong. Buy you can certainly prove yourself wrong by looking up a single number.


You further wrote:

It would appear that there is a massive discrepancy between the national (government) debt and the amount of treasury securities issued. Either you can explain it or not.

There's no discrepancy; the only problem is that your information is irrelevant because it's measuring the wrong things.

$1,167,087/14,148,216 equals about 8.2%. I don't know what is hard to understand about this.

... as is easily shown when respect pulled a then-current number and did the actual division. But this is a division you should have been able to estimate in your head. That you don't actually know the size of the debt does indeed argue lack of intelligence.

 

[psionl0]

That is a much better standard of criticism than I have gotten accustomed to from you drkitten. If respect had done anywhere near as much work as you just did then you would have had a lot less material to quote from.

 

[drkitten]

That is a much better standard of criticism than I have gotten accustomed to from you drkitten. If respect had done anywhere near as much work as you just did then you would have had a lot less material to quote from.

No, you simply would have misinterpreted even more of the material that you were spoon-fed. The point still remains that your (now amply demonstrated) lack of intelligence does not imply laziness on his part.

 

[psionl0]

No, you simply would have misinterpreted even more of the material that you were spoon-fed.

Respect provides one number and grudgingly provides a link after I challenge him on it. The only reason that you call it "spoon feeding" is because respect is part of your rent-a-crowd. You would apply a much higher standard of evidence to somebody who wasn't agreeing with you.

The point still remains that your (now amply demonstrated) lack of intelligence

You made 5 quotes out of about 20 posts I made on this matter. You also editorialized these quotes to ensure that the reader didn't get a different idea. I'm surprised that you weren't able to paint a worse picture of me than you did.

does not imply laziness on his part.

Never said any such thing anyway. Respect implied laziness all by himself.

FOR THE RECORD: I was mistaken about the amount of government debt actually held by the federal reserve. I don't mind being proven wrong about something. I just draw the line at doing the proving myself.

 

[drkitten]

FOR THE RECORD: I was mistaken about the amount of government debt actually held by the federal reserve. I don't mind being proven wrong about something. I just draw the line at doing the proving myself.

Well, you can claim to "draw the line" wherever you like, but it's also blatantly apparent from where you draw it that you're not interested in actually learning anything if you're not willing to chase the information you've been given.

You've given ample examples of this; you're not willing to look up the national debt. You're also not willing to look up wealth creation, or even to read Adam Smith's parable of the pin factory to see the classic explanations that are familiar to anyone with a passing knowledge of economic literature. Even people who disagree with Adam Smith are generally expected to know his ideas, so that they can discuss, with knowledge, why they disagree.

If you won't look up why you're wrong when someone else tells you and even tells you what information you should look up, then, first, you're dishonest. Second, you're lazy. And third, you're stupid, because respect might well be lying to you, and you should have the ability to check the so-called facts he presents for yourself.

He said, earlier, that the national debt was $14,148,216,000,000.

Why do you believe him? How do you know that the number's not closer to $25 trillion? Or $7 trillion?

And if you can look up the national debt and -- and do the division -- NOW, why couldn't you have done it before, instead of whining about a non-existent "discrepancy"?

FOR THE RECORD: You're lazy, dishonest, and stupid. And trying to blame respect for those failures of yours just heightens the problem.

 

[drkitten]

You made 5 quotes out of about 20 posts I made on this matter. You also editorialized these quotes to ensure that the reader didn't get a different idea. I'm surprised that you weren't able to paint a worse picture of me than you did.

Oh, I was able to, but I decided to go for honest reportage instead, and to paint an accurate picture instead of a lyingly unflattering one.

 

[psionl0]

I decided to go for honest reportage instead, and to paint an accurate picture instead of a lyingly unflattering one.

So why didn't you?

 

[drkitten]

So why didn't you?

Shrug. I stand by what I wrote as an accurate portrayal.

 

[respect]

Respect provides one number and grudgingly provides a link after I challenge him on it. The only reason that you call it "spoon feeding" is because respect is part of your rent-a-crowd. You would apply a much higher standard of evidence to somebody who wasn't agreeing with you.

You made 5 quotes out of about 20 posts I made on this matter. You also editorialized these quotes to ensure that the reader didn't get a different idea. I'm surprised that you weren't able to paint a worse picture of me than you did.

Never said any such thing anyway. Respect implied laziness all by himself.

FOR THE RECORD: I was mistaken about the amount of government debt actually held by the federal reserve. I don't mind being proven wrong about something. I just draw the line at doing the proving myself.

How about you stop pretending that the problem wasn't that you simply did not understand the discussion?

You are making it amazingly easy for both of us to make a fool out of you.

 

[psionl0]

How about you stop pretending that the problem wasn't that you simply did not understand the discussion?

I am fed up with all this nonsense over a simple matter of fact.

Readers are going to form their own conclusions regardless of what any one poster says so let's say I simply did not understand the discussion and be done with it.

 

[webb5]

Back to Social Credit

The Guernsey Market House Scheme (A financial experiment)

Over 100 years ago, an economic experiment known as the Guernsey Market House Scheme was implemented on a small island called Guernsey. This island was in an economic financial mess. All trade of Guernsey was steadily going to a stand still with unemployment rife. To make things worse the sea defenses were breaking down.

There were practically no roads and most public buildings were in great disrepair. Above all, a new market house was urgently needed, where the islanders could exchange their produce. It was impossible for the Government to finance these necessary improvements out of its revenue as this entire amount was required for ordinary expenses and the interest charges incurred on previous debt. The Government did indeed try to raise a loan, but because of the poor state of the island's assets, the banks demanded the prohibitive rate of 17 per cent per annum.
As such necessary finance could not be obtained by further borrowing.


"Necessity is the mother of invention" and in this case the idea that was put forward that the State should issue its own money, gained ground. It was argued that, as labour and materials were both available, it was absurd for improvements to be held up simply through lack of money. As conditions became even worse, this plan was soon seen by many as the only solution.

Finally, after various setbacks and considerable opposition, the adherents of State money carried the day and in 1816, 4,000 notes of £1 each were printed by the Government and paid out for the most urgent repairs. By the success of this issue the principle was established and during the next 20 years the Government authorised notes to the extent of £80,000, which were utilised in building the new Market House, schools in every parish, roads all over the island, St. Elizabeth's Cottage, etc.

These Government notes were redeemed, as the economic circumstances of the island justified, from earnings derived from the collection of market rents, customs duties, etc., and in 1836, when the scheme ended, there was a balance outstanding of £55,000 Government notes.

During the First World War, Australia also used this same principal to finance its massive costs of going to war. The People’s Bank was used to finance the war. The limiting factor was not credit; it was what the Australian people could do. If they needed to build a warship, these questions were asked. Is there enough steel? Is there a dry dock to build them? Are there enough engineers, do we have enough painters, do we have a crew to man these ships?

The limiting factor is the materials, the know how and man power to do these things. Once it was shown that these resourses were available the money was immediately allocated without debt. In reality the war could have been financed this way many times over if they had to, because they had so many reserves in materials.

The real cost to Australia, was in the lives lost on the battlefield and the injuries sustained but it wasn’t a financial price. In peace time, Australia continued to use Social Credit, instead of building warships they built schools and infrastructure.

http://www.youtube.com/watch?v=0lRm2Wwejaw

 

[webb5]

Is it inflationary to create money? Would we end up like Germany with hyper inflation? Obviously the creation of money must be regulated. It is vital that the supply of money is kept in check and in line with production of goods and services. The government elected by the people, should be the only body allowed to responsibly create money. It should not be created as debt!

The international banks have financed the world’s money supply with their ‘funny money’. They have created this money out of nothing, representing nothing of value. It is the seller of goods and services that actually puts any value into this money. The people have been tricked into risking their assets (real wealth) and future earnings as collateral in order to borrow this monopoly money. It is truly a confidence trick on the people

The banks have turned the financial state of the world’s economies into a house of cards. By controlling the world’s money supply, they control the parliaments of any nation and thus the people. Our sovereignty is at stake.

We are told by economists that basically the debt problem is a production problem and that we can all get out of debt by increasing exports to other countries that will magically fix all our debt. Unfortunately this does not add up, as every nation is told to do the same thing, export more and import less. All nations of the world - are trying to do the impossible; to BORROW their way out of DEBT!

Of the largest 100 economies of the world, 51 are corporations and only 49 are countries. Multi national corporations exert enormous economic influence and are impacting dramatically on employment and government tax revenues. These gigantic organisations are set to cut their work force with the use of new generation of automated machines and technology, we are already seeing this happen. As unemployment is growing, countries are also see their tax base shrinking as multicorporations, banks and wealthy individuals are increasingly shifting their incomes off-shore into low tax havens and by transfer- pricing. Is it any wonder why the world is in the state it is!

God created this world with everything we would ever need in abundance. It is the Greed and lust for world power that has inflicted so much suffering on mankind.

 

[Tippit]

During the First World War, Australia also used this same principal to finance its massive costs of going to war. The People’s Bank was used to finance the war. The limiting factor was not credit; it was what the Australian people could do. If they needed to build a warship, these questions were asked. Is there enough steel? Is there a dry dock to build them? Are there enough engineers, do we have enough painters, do we have a crew to man these ships?

The limiting factor is the materials, the know how and man power to do these things. Once it was shown that these resourses were available the money was immediately allocated without debt. In reality the war could have been financed this way many times over if they had to, because they had so many reserves in materials.

The real cost to Australia, was in the lives lost on the battlefield and the injuries sustained but it wasn’t a financial price. In peace time, Australia continued to use Social Credit, instead of building warships they built schools and infrastructure.

This is the problem with fiat money - the inflation tax is used to finance unpopular wars, and has been throughout history. If governments and bankers couldn't inflate the currency as a way of taxing their constituents in order to pay for unpopular wars, the wars couldn't happen otherwise. This is the problem with the status quo, and the system you just described. Of course, a social credit scheme could be implemented with various statuatory requirements limiting money creation.

 

[Tippit]

Is it inflationary to create money? Would we end up like Germany with hyper inflation? Obviously the creation of money must be regulated. It is vital that the supply of money is kept in check and in line with production of goods and services. The government elected by the people, should be the only body allowed to responsibly create money. It should not be created as debt!

I would argue that what is really vital under a fiat money regime, is who decides who receives the new money. You are aware that the global model for central banks at present is for the bank to return most of their profits to their country's Treasury, right? To the extent that this actually happens, the profits of debt money accrue to the state, which is more or less what you're advocating. Granted, if I had to choose the lesser of evils, I would rather politicians made these decisions rather than autocratic quasi-private central bank chairman.

 

[psionl0]

Is it inflationary to create money?

The effect of governments creating money is not inflationary as long as the created money results in more goods and services being produced (what you would hope to happen if the government builds a road or factory) or the government recovers the created money through taxation.

Since governments tend to run budget deficits mainly to maintain current expenditure (rather than capital growth), inflation will always be a fact of life.