How the banks create money

[tensordyne]

Sorry, just thought I would interject about this one from a previous post.

I don't suspect Tensordyne, with his ass-backwards interpretation of monetary history, to grasp this, but I suppose you do, at least.

If you want tensordyne to understand you then quote from Zarlenga.

If Tippit were to read from Zarlenga it might be a shock to the system. After the realisation occurs to Tippit that listening to mentally handicapped commentators is what Tippit has been doing, who knows what might happen. I imagine it would be like a Cult follower realising their Guru does not live on cloud nine or something.

 

[psionl0]

I know I said I would let psionl0 argue with you Tippit, but there are just too many juicy pieces of misunderstanding in your last post for me not to want to take a bite.

Pinch my response to Tippit will you? ().

Actually there are only a couple of things I want to comment on. The rest boils down to a matter of opinion.

Transition to sound money will be painful absent a necessary debt default. The economy needs to reset, and illegitimate debts need to be cleared.

Wait until after the economic armageddon then worry about where we will get the backing for sound money? Surely you can come up with a better plan than that!

And what debts are you calling illegitimate? The government has no right to mortgage away our futures like it has done. However, stiffing bond holders is not an acceptable way to solve our debt problem.

Each dollar used to monetize debt is a dollar that requires the public to pay interest in order to keep it in circulation.

Debt monetization misses the point. Every $1 created by a bank needs someone to pay interest on it. Every $1 created by the government is debt-free and nobody need pay interest on it. The fact that the government created money is used to buy back bonds is irrelevant because the total interest bill is unchanged by the newly created fiat money (except that interest paid to the fed should be returned to the treasury).

Are you talking about a hypothetical world of credit-based fiat money?

Now that you mention it, yes. Credit-based fiat money is the real world today. In days gone by, when banks issued bank-notes, they were offering to give something of value (gold) in exchange for them. Ie they were IOUs. The fiat notes issued by the government are also IOUs because the government offers something of value for them. In this case, they don't directly offer anything of value but they guarantee to force any creditor to accept these notes as payment for a debt.

All the best to you Tippit, the inestimable psionl0 and even Sceptic-PK whom I seem to have scared away or something.

"Semantic wankers" are easily frightened.

 

[Sceptic-PK]

I’ve been “scared away” in the same sense that the soles of my shoes are “scared” of dog ◊◊◊◊.

 

[psionl0]

"Scared away" by your own verbal diarrhea? I guess you better stop putting your feet into your mouth. (Just joking )

 

[Tippit]

Sound money, well, I am going to cover it below. Define for me sound money in a neutral way that would not in an a priori way make it "hard money" by circular definition, then maybe we can talk of this sound money.

Sound money, hard money, it doesn't matter what you call it. Money with intrinsic value, for which the supply doesn't have a practically unlimited upside. I don't see why you're splitting hairs here.

Light is thrown on this mystery by the later writings of Hjalmar Schacht, the currency commissioner for the Weimar Republic. The facts are explored at length in The Lost Science of Money by Stephen Zarlenga, who writes that in Schacht's 1967 book The Magic of Money, he "let the cat out of the bag, writing in German, with some truly remarkable admissions that shatter the 'accepted wisdom' the financial community has promulgated on the German hyperinflation." What actually drove the wartime inflation into hyperinflation, said Schacht, was speculation by foreign investors, who would bet on the mark's decreasing value by selling it short.
​

So Schacht, the man with ultimate control over the supply of marks, the counterfeiter-in-chief, as it were, blamed evil "speculators" for the utter annihilation of the mark? Tell me, where did these evil speculators get their supply of marks to short, if not ultimately from Schacht and his policy? In order to short something, one must first borrow it, and in order to borrow it requires it to pre-exist, or be conjured into existence simultaneously. Funny, I seem to recall reading something in the news recently about how higher global commodity prices are the fault of those evil speculators, with no mention of Mr. Bernanke. It seems this particular lie has a long shelf-life. No, the price of fiat money is the reciprocal of the price of the goods and services that it denominates, which itself is intimately related to its supply. This is basic economics 101, the supply-demand model. If this is an example of Zarlenga's work, I'm unimpressed.

Or this quote by Henry C. K. Liu from the same article:

The Nazis came to power in Germany in 1933, at a time when its economy was in total collapse, with ruinous war-reparation obligations and zero prospects for foreign investment or credit. Yet through an independent monetary policy of sovereign credit and a full-employment public-works program, the Third Reich was able to turn a bankrupt Germany, stripped of overseas colonies it could exploit, into the strongest economy in Europe within four years, even before armament spending began.
​

What does this have to do with Zimbabwe though? Before going there, consider the following quote:

The dramatic difference in the results of Germany's two money-printing experiments was a direct result of the uses to which the money was put. Price inflation results when "demand" (money) increases more than "supply" (goods and services), driving prices up; and in the experiment of the 1930s, new money was created for the purpose of funding productivity, so supply and demand increased together and prices remained stable. Hitler said, "For every mark issued, we required the equivalent of a mark's worth of work done, or goods produced." In the hyperinflationary disaster of 1923, on the other hand, money was printed merely to pay off speculators, causing demand to shoot up while supply remained fixed. The result was not just inflation but hyperinflation, since the speculation went wild, triggering rampant tulip-bubble-style mania and panic.
​

So in order to defend fiat money, you're left with advocating national socialism, and quoting Hitler. This is an example of the statism that accompanies fiat money. You are a statist. Perhaps an unwitting statist, but a statist nevertheless. You act as though full employment is some miraculous achievement. The government could declare a military draft, and we would have full employment overnight. Hopefully military bureaucrats would plan for enough farms and farmers so that the population doesn't starve, ala Stalin.

Look, I don't think you really comprehend the issue here. Fiat money can work, I'm not disputing that. If the supply is limited, and it isn't used as a regressive form of taxation that would otherwise be called theft if it were done privately by a counterfeiter, it can work. The problem isn't that it can't work, for a time, the problem is that given the immense profits of seigniorage, and the weakness of human nature, it is bound to fail, catastrophically.

Now comes Ellen Brown's synopsis of what happened in Zimbabwe that continues from directly above:

This was also true in Zimbabwe, a dramatic contemporary example of runaway inflation. The crisis dated back to 2001, when Zimbabwe defaulted on its loans and the IMF refused to make the usual accommodations, including refinancing and loan forgiveness. Apparently, the IMF's intention was to punish the country for political policies of which it disapproved, including land reform measures that involved reclaiming the lands of wealthy landowners. Zimbabwe's credit was ruined and it could not get loans elsewhere, so the government resorted to issuing its own national currency and using the money to buy U.S. dollars on the foreign-exchange market. These dollars were then used to pay the IMF and regain the country's credit rating. According to a statement by the Zimbabwe central bank, the hyperinflation was caused by speculators who manipulated the foreign-exchange market, charging exorbitant rates for U.S. dollars, causing a drastic devaluation of the Zimbabwe currency.

The government's real mistake, however, may have been in playing the IMF's game at all. Rather than using its national currency to buy foreign fiat money to pay foreign lenders, it could have followed the lead of Abraham Lincoln and the American colonists and issued its own currency to pay for the production of goods and services for its own people. Inflation would then have been avoided, because supply would have kept up with demand; and the currency would have served the local economy rather than being siphoned off by speculators.
​

Ahh yes. It's that time-travelling band of evil speculators once again! It couldn't have anything to do with the fact that old Bob Mugabe figured out that he could impose a practically unlimited rate of taxation on his populace by simply confiscating the few goods and services actually produced in Zimbabwe - by paying for them in fiat money. Wait... where did those speculators actually get the Zimbabwe dollars to short? The Central Bank of Zimbabwe? You don't say.

You have fallen for the trap set by Neoclassical Economists Tippit. They did not tell you the whole story, only a kind of sound-bite history. Formula for when anyone brings up having the government in charge of the printing press: say Zimbabwe did the same thing and look at how messed up they are. Don't mention how 'real' money works or any mitigating circumstances. No, keep the story real simple. They printed money, then they had hyper-inflation, end of story.

You've fallen for a load of pseudo-economic bull ****, and you advocate command and control statism, funded by fiat money, branded as "reform". You also managed to apologize for Schacht, Hitler, and Mugabe, and somehow I am the one who is ignorant of history.

Gresham's Law is interesting in that it shows why the Austrians are wrong on so many fronts. Simply put if there are two moneys and one is made of a material that is worth more than the same amount of another money whose face value is the same, then the money that has a material value of being higher is hoarded.

Nope. Just as I explained to psion, good money is hoarded because the acceptance of fiat money is forced by definition (by decree). Take away the decree, and sellers will demand real money. Your misunderstanding of this is because you don't account for the seller's preference in a free market of money, only the buyer's.

Wait a minute, doesn't that go along with Austrian ideas? No, because it shows there is a difference between money as an institution and commodity valuation of some material. That the two can even be different is not something that should be in existence according to Austrian based ideas.

This doesn't make any sense. The Austrians correctly realize that the commodity chosen by the free market to serve as money for over five thousand years of history, is gold. When gold is allowed to serve this function, it's worth more. When it's not, it's worth less. Sometimes, as on the eve of the utter destruction of the global fiat currency system, it begins to assert its historical role as de facto reserve currency in spite of decrees, as it is at this very moment.

First off, it is tensordyne with a lower t. It is bad etiquette to misspell someone's name. I do not really care, just thought I would ding you on it is all. I have seen a trend of people using common shortened versions of other posters' names here on JREF. As such shortened versions of a name, it seems to me, are chosen by others, perhaps it is bad for me to suggest a shortened version of my name, but, all the same, I suggest 'td' for tensordyne, if you want to save a few keystrokes.

Give me a break. Melodramatic much?

We're not making any progress here, and by citing Zarlenga and his ridiculous take on history, you've effectively disqualified him from making an appearance on my reading list. He's just wrong.

Can we agree to disagree now?

 

[Tippit]

Wait until after the economic armageddon then worry about where we will get the backing for sound money? Surely you can come up with a better plan than that!

The crisis is baked in. Default is the only non-regressive solution to make things less worse for the vast majority of people.

And what debts are you calling illegitimate? The government has no right to mortgage away our futures like it has done. However, stiffing bond holders is not an acceptable way to solve our debt problem.

Some of the ones created by unaccountable bureaucrats in the name of the public, and some of the ones created by unethical private banks are illegitimate. Greece will not be able to pay down its debt without a crushing depression and debilitating austerity. Greek taxpayer dollars should not go to service or pay down illegitimate debts incurred by corrupt politicians. Greece needs to default, and so does the US. I advocate a selective default, which only targets foreign central banks, and wall street money center banks. Don't default on mom and pop.

Debt monetization misses the point. Every $1 created by a bank needs someone to pay interest on it. Every $1 created by the government is debt-free and nobody need pay interest on it. The fact that the government created money is used to buy back bonds is irrelevant because the total interest bill is unchanged by the newly created fiat money (except that interest paid to the fed should be returned to the treasury).

It doesn't miss the point. Not only does it function as a massive and regressive tax, since the Fed doesn't need to exist and should be abolished, its cut of the revenues from its government bond portfolio would be saved.

Now that you mention it, yes. Credit-based fiat money is the real world today. In days gone by, when banks issued bank-notes, they were offering to give something of value (gold) in exchange for them. Ie they were IOUs. The fiat notes issued by the government are also IOUs because the government offers something of value for them. In this case, they don't directly offer anything of value but they guarantee to force any creditor to accept these notes as payment for a debt.

Credit-based fiat money is presumably your ideal hypothetical. Debt-based fiat money is the reality (although it's not strictly debt-based, ie: not redeemable for debt, it is born of and requires a corresponding amount of debt in order to exist). The second portion of your paragraph is a somewhat accurate summary of the problem. I would say that Federal Reserve Notes are obviously valuable, it's just that the value is extrinsic, and based on coercion.

 

[psionl0]

The crisis is baked in. Default is the only non-regressive solution to make things less worse for the vast majority of people.



Some of the ones created by unaccountable bureaucrats in the name of the public, and some of the ones created by unethical private banks are illegitimate. Greece will not be able to pay down its debt without a crushing depression and debilitating austerity. Greek taxpayer dollars should not go to service or pay down illegitimate debts incurred by corrupt politicians. Greece needs to default, and so does the US. I advocate a selective default, which only targets foreign central banks, and wall street money center banks. Don't default on mom and pop.

i can't for the life of me see how a government could selectively default on any debt without having a debilitating effect on "mom and pop". Even if such a thing were possible you can be sure that politicians wouldn't do it. Their main priority would be to protect the overfed banksters (and other corporate doubtfuls) who provide politicians with most of their illicit gains. More likely you would be saying "bye bye" to your social security fund.

Greece is a classic example of what happens when governments have no say in the money supply. Knowing that there was a limit to how much the government could borrow, did the Greek politicians show any restraint? Of course not! Dealing with the meltdown will be somebody else's problem - after the next election.

If Greece were to opt out of the Euro and abolish FRB then it could gradually print its way out of debt.

It doesn't miss the point. Not only does it function as a massive and regressive tax, since the Fed doesn't need to exist and should be abolished, its cut of the revenues from its government bond portfolio would be saved.

I keep forgetting about the "counterfeiting" tax (a more appropriate description than "inflation" tax). Nevertheless, once the bill has been printed and the government bought something with it (that it couldn't otherwise buy), the bill exists debt-free and no interest is payable on it.

Credit-based fiat money is presumably your ideal hypothetical. Debt-based fiat money is the reality (although it's not strictly debt-based, ie: not redeemable for debt, it is born of and requires a corresponding amount of debt in order to exist). The second portion of your paragraph is a somewhat accurate summary of the problem. I would say that Federal Reserve Notes are obviously valuable, it's just that the value is extrinsic, and based on coercion.

It is easy to mix up the words "credit" and "debt" (depends on whether you are the creditor or debtor) so I'm not sure that there is an argument here. Fiat currency is theoretically a liability for the government but because the government is forcing creditors to give value for the fiat currency, there is no risk for the government.

 

[tensordyne]

Ego or Evo, you decide!

I’ve been “scared away” in the same sense that the soles of my shoes are “scared” of dog ◊◊◊◊.

Correct me if I am wrong, but the mathematics that psionl0, and now I, am advocating, as to how FRB works, does it, or does it not, match up with how you understand FRB to work? If yes, then this braggadocio banter hardly matters. If not, then say how the mathematics is incorrect and offer your alternative (hopefully with actual arguments) or barring an alternative, just reasons for why you believe psionl0's model is false.

I said scared away because you did not respond to my last post like usual. I really do not care any more. I was annoyed but now I know what you were possibly trying to get at. I consider that a positive thing.

My only remark now is show me the mathematics / arguments for whatever is your position, or I do not see why you really need to respond at all, except maybe to nurse some hurt ego or something. If nursing your ego is the goal, I for one am uninterested.

 

[Tippit]

i can't for the life of me see how a government could selectively default on any debt without having a debilitating effect on "mom and pop". Even if such a thing were possible you can be sure that politicians wouldn't do it. Their main priority would be to protect the overfed banksters (and other corporate doubtfuls) who provide politicians with most of their illicit gains. More likely you would be saying "bye bye" to your social security fund.

Once again, the disaster is baked in. We can't avoid it now. We can only mitigate the circumstances. In fact, not defaulting would force the government to choose between paying interest to bankers, or paying social security benefits to retirees, austerity, as it were. But where the government has made far too many illegitimate promises to bondholders, taxpayers, retirees, welfare recipients (corporate and social), and others, we can at least as a society advocate where that money goes, and if we have to have austerity, I choose austerity for the super-rich government bond holders (selective default).

Greece is a classic example of what happens when governments have no say in the money supply. Knowing that there was a limit to how much the government could borrow, did the Greek politicians show any restraint? Of course not! Dealing with the meltdown will be somebody else's problem - after the next election.

So, you criticize government borrowing, but you're willing to impose austerity measures on the Greek populace rather than defaulting on Wall Street, and French and German mega-banks that willingly put the Greek people in hock, along with corrupt politicians. No. Greece should default on the banks, and the greek people should default on their taxes and impose austerity on the politicians.

If Greece were to opt out of the Euro and abolish FRB then it could gradually print its way out of debt.

Your "solution" of inflating the way out of debt would simply be a tax on the lower and middle class Greeks, which is really just another form of austerity. A far better solution is for the Greeks to simply repudiate their bad debts. Lesson to the greedy banks: you really can lose money lending to corrupt politicians mismanaging sovereigns.

I keep forgetting about the "counterfeiting" tax (a more appropriate description than "inflation" tax). Nevertheless, once the bill has been printed and the government bought something with it (that it couldn't otherwise buy), the bill exists debt-free and no interest is payable on it.

I agree with your terminology, and yes, absent FRB this would be the case.

It is easy to mix up the words "credit" and "debt" (depends on whether you are the creditor or debtor) so I'm not sure that there is an argument here. Fiat currency is theoretically a liability for the government but because the government is forcing creditors to give value for the fiat currency, there is no risk for the government.

Fiat currency, unlike debt (which is fiat by default) is not a liability for government, because it represents no promise to pay anything. If you "redeem" your $10 Federal Reserve Note to the Treasury, you're likely to get two pieces of paper marked $5 in return.

You are a proponent of credit-based fiat money, that is, you want government to have the exclusive right to counterfeit or "print" money into circulation, under the assumption that this power won't be abused, and will be subject to some kind of political checks and balances (we'll vote the bastards out after they debase the currency and stock their crony contractors bank accounts with it!) That will work wonderfully, for a while, until any statuatory limits are either repealed or simply ignored.

In essence, you have one more level of faith than I do. Neither do I trust private bankers, nor do I trust politicians.

 

[Tippit]

I just watched a documentary that both of you (the only two honest posters left in this thread) should enjoy. It's called The Secret of Oz, by Bill Still. Watch it with a critical eye, then read this with a critical eye: Meet Bill Still, Fiat-Money Advocate.

Obviously I agree with a lot of what Still says, and disagree with a lot as well. It's critically important that monetary reform isn't based on a false solution, whatever thay may be.

 

[Sceptic-PK]

Correct me if I am wrong, but the mathematics that psionl0, and now I, am advocating, as to how FRB works, does it, or does it not, match up with how you understand FRB to work? If yes, then this braggadocio banter hardly matters. If not, then say how the mathematics is incorrect and offer your alternative (hopefully with actual arguments) or barring an alternative, just reasons for why you believe psionl0's model is false.

I said scared away because you did not respond to my last post like usual. I really do not care any more. I was annoyed but now I know what you were possibly trying to get at. I consider that a positive thing.

My only remark now is show me the mathematics / arguments for whatever is your position, or I do not see why you really need to respond at all, except maybe to nurse some hurt ego or something. If nursing your ego is the goal, I for one am uninterested.

I thought I was already pretty clear on my current lack of math talent. MMM makes it clear that banks lend excess reserves. Your refusal to accept this makes me doubt there’s any point in trying to explain further, even if I was back in high school and could work my way through your equations. Peace.

 

[tensordyne]

... the conclusion ...

I thought I was already pretty clear on my current lack of math talent. MMM makes it clear that banks lend excess reserves. Your refusal to accept this makes me doubt there’s any point in trying to explain further, even if I was back in high school and could work my way through your equations. Peace.

Peace to you too then Sceptic-PK.

 

[psionl0]

I just watched a documentary that both of you (the only two honest posters left in this thread) should enjoy. It's called The Secret of Oz, by Bill Still.

I saw it last year. There are a number of web sites that discuss the imagery in "The Wizard of Oz" (which suggests that "silver" is the answer). I'm not sure why Bill Still chose to add his 2 cents worth unless it was to draw attention back to the Money Masters.

Watch it with a critical eye, then read this with a critical eye: Meet Bill Still, Fiat-Money Advocate.

The freedomforceinternational article site includes this gem:

In a similar vein, he (Bill Still) approvingly surveys the early colonial period in which colonial governments resorted to printing-press money without silver or gold backing. It led to disastrous inflation and was devastating to the common man; but he says this was caused, not by flooding the colonies with fiat money, but by England forcing the colonies to STOP the practice!​

Do you really expect me to take the rest of the article seriously?

Obviously I agree with a lot of what Still says, and disagree with a lot as well. It's critically important that monetary reform isn't based on a false solution, whatever thay may be.

Unless we get enough of the world's gold into the US, a gold standard will be equally a false solution.

 

[psionl0]

I thought I was already pretty clear on my current lack of math talent.

Now all you have to do is draw attention to your current lack of reading for comprehension talent and your current lack of critical thinking skills talent.

 

[Sceptic-PK]

Now all you have to do is draw attention to your current lack of reading for comprehension talent and your current lack of critical thinking skills talent.

You’re the one that still can’t understand MMM properly, lulz.

 

[Tippit]

The freedomforceinternational article site includes this gem:

In a similar vein, he (Bill Still) approvingly surveys the early colonial period in which colonial governments resorted to printing-press money without silver or gold backing. It led to disastrous inflation and was devastating to the common man; but he says this was caused, not by flooding the colonies with fiat money, but by England forcing the colonies to STOP the practice!​

Do you really expect me to take the rest of the article seriously?

Why do you take exception to that? Griffin is the author of The Creature from Jekyll Island, the most well-sourced and well-documented critique of the Federal Reserve. He probably deserves more than a summary dismissal. I just watched the documentary, however, and it's apparent that Still blamed the destruction of the Continental on British counterfeiting. Do you think thats likely? Either way, presumably you accept the premise that the Continental was oversupplied, whether it was Colonial politicians or British counterfeiters.

Unless we get enough of the world's gold into the US, a gold standard will be equally a false solution.

Again, I'm not arguing for a gold standard, I'm arguing against a fiat standard. I don't think the supply of gold is material, because the market will value it accordingly. How much gold do you think is enough? I think the biggest caveat to a gold standard is the idea that powerful dynastic banking families are hoarding it, and would retain undue political and economic power. I would first jail those criminals and liberate their gold before implementing such a thing.

 

[tensordyne]

psionl0,

Now all you have to do is draw attention to your current lack of reading for comprehension talent and your current lack of critical thinking skills talent.

Ouch!

I do not understand the idea of a person who admits to not being exactly mathematically proficient saying that two other persons who are proficient in this regard are wrong. Math is a language. The rules of banking are in essence mathematical. It is just odd. It seems like Sceptic-PK picked up on one thing that could be understood and has not tested any of the assumptions for the model Sceptic-PK has, after this.

It is not worth your or my time to argue with Sceptic-PK. Sceptic-PK has said what the model is that Sceptic-PK believes in and that is all there is to it. I think my reply is shaping up nicely to Tippit's last post to me.

Sorry about not making any posts recently. I suddenly became involved in dealing with Tippit's response while I was in the middle of making a response to your last post.

 

[tensordyne]

lulz

You’re the one that still can’t understand MMM properly, lulz.

I did it for the Sceptic-PK lulz!

 

[Sceptic-PK]

I do not understand the idea of a person who admits to not being exactly mathematically proficient saying that two other persons who are proficient in this regard are wrong. Math is a language. The rules of banking are in essence mathematical. It is just odd. It seems like Sceptic-PK picked up on one thing that could be understood and has not tested any of the assumptions for the model Sceptic-PK has, after this.

If I had commented on your mathematics you might have a point. As it stands I merely refer to the nonsense you've put into words. I sincerely hope that your mathematical skills are where your true talents lie.

Sceptic-PK has said what the model is that Sceptic-PK believes in and that is all there is to it.

Haha. Your signature is a perfect illustration of you doing precisely this- a handful of sentences that you still don't understand, you won't understand, because it satisfies your anti-banking world view. You're just the ugly step-child of the discredited left. At least they got some things right though.

 

[tensordyne]

The Newest in the long running saga of Tippit, the middling Priest of Molech

Sound money, hard money, it doesn't matter what you call it. Money with intrinsic value, for which the supply doesn't have a practically unlimited upside. I don't see why you're splitting hairs here.

From this I take it that Sound/Hard Money is either or both of the following according to you:

1. Has Intrinsic Value.
2. Is of finite size, with the indication that no entity could make it larger.

Part 1. is nonsense. Might as well talk about money having dry wetness, objective subjectiveness, etc. Value is a normative term. Intrinsic is an inherently non-normative term. A piece of obsidian may be very valuable to a caveman, but to me it is just a possibly very sharp volcanic rock and therefore not very valuable. The spin of an electron is (1/2) * h-bar. That is its intrinsic spin. Aliens from another planet would say the same thing. That is why it is intrinsic.

At the heart of any flawed philosophy there often is a set of core nonsense beliefs. This is one that goes right to the heart of Austrian Economics. Gold and silver have changed in relative value over the millenia, both to each other and to other items in an economy. If gold or any other substance really did have an intrinsic value, one should be able to say its value is X in some physics based units. It does not have this property, so the whole idea is nonsense.

The best you could say is that gold has historically been held as valuable. That though would just be a statement of common-sense and not a mythologising dictum.

Part 2. at least has the ability to be objective and not requiring money to be gold or other commodity in the circular fashion I asked for earlier.

Asking for an objective definition is not splitting hairs, it is being rational. Thank you for your best try. In terms of the part of the definition that makes some kind of sense, part 2. that is, sovereign money is not Hard/Sound money as so defined.

But then, Sound money is probably not meant in that way is it? What is meant is a money that does not loose or gain in value over time. I have already quoted to you how even one of your own, Adam Smith, said the Colonial Moneys held their value. Huh, guess that would make them a sound money no?

So Schacht, the man with ultimate control over the supply of marks, the counterfeiter-in-chief, as it were, blamed evil "speculators" for the utter annihilation of the mark? Tell me, where did these evil speculators get their supply of marks to short, if not ultimately from Schacht and his policy?

Schacht was put in power after the hyperinflation occurred. He stabilised the currency of Germany using the Rentenmark and by restricting how many were issued. There was also put in place by him a requirement that the Rentenmarks could not be traded on foreign markets, thus stripping the short-sellers of their profits. It worked too.

By the way, the Banksters are not afraid of gold becoming money. They know that if gold becomes money it will fail and they can lead it back to what they have now, just like what was done in the US over a hundred years ago. They are afraid of sovereign credit however.

...slavery is but the owning of labor and carries with it the care of the laborers, while the European plan... is that capital shall control labor by controlling wages. This can be done by controlling the money. It will not do to allow the Greenback... as we cannot control that."

-- Hazard Circular of July 1862
​

The Banksters already have control of your precious Gold and Silver Tippit. I will leave this argument here so you can come to the wrong conclusions in due course.

In order to short something, one must first borrow it, and in order to borrow it requires it to pre-exist, or be conjured into existence simultaneously. Funny, I seem to recall reading something in the news recently about how higher global commodity prices are the fault of those evil speculators, with no mention of Mr. Bernanke. It seems this particular lie has a long shelf-life. No, the price of fiat money is the reciprocal of the price of the goods and services that it denominates, which itself is intimately related to its supply. This is basic economics 101, the supply-demand model. If this is an example of Zarlenga's work, I'm unimpressed.

So you have noticed that a current trend has a parallel to what Zarlenga (technically the article I quoted from is by Ellen Brown) has noted for the past. That would probably mean history is going to repeat itself, and, what do you know? So far it seems to be happening. That would put their work in a positive light in my book as a warning sign.

As far as Mr. Bernanke goes, maybe they should have mentioned him then.

What, specifically is the lie?

It is interesting your model of how money is valued. So when I buy an item for $10, the price of the money is $(1/10), or is it 1/$10, also known as 0.1 inverse dollars. Really, I have no idea what you are getting at because it seems like a bunch of nonsense to me. It seems like to me if one widget exists and is worth $1 when there is $10 to be had, then 10 widgets should be each worth $10 when there is $100 to be had. That is all Ellen Brown is trying to point out in that connection.

So in order to defend fiat money, you're left with advocating national socialism, and quoting Hitler. This is an example of the statism that accompanies fiat money. You are a statist. Perhaps an unwitting statist, but a statist nevertheless. You act as though full employment is some miraculous achievement. The government could declare a military draft, and we would have full employment overnight. Hopefully military bureaucrats would plan for enough farms and farmers so that the population doesn't starve, ala Stalin.

I am not a statist and I am, sorry to disappoint you, not a Nazi. I am pretty sure you haven't the foggiest what I really am, which to the best of my knowledge would be described as a Georgist (Henry George) Sovereign Creditist with some ideas all my own mixed in (Liberal socially speaking). I think you are an Austrian School Anarcho-Capitalist, no? By all means correct me if I am wrong.

If I was a statist, I would think that the state should serve the interests of some elite with the people merely going along for the punishing ride. That is not what I think, thank you very much! Nor is it what the policies I advocate for have led to, historically speaking.

Did you happen to notice that Henry C. K. Liu said "even before armament spending began." There falls the argument you made about how it is not extraordinary to have full employment in this case. Or how Germany was stripped of overseas colonies to exploit, had ruinous war reparations, massive inflation and zero chance of foreign investment, and thus by the conventional logic, should be dead in the water. The implication is then that sovereign credit was what allowed Germany to have such a strong economy. Naw...

Nope, make up some BS about the economic policies of sovereign credit in connection to Nazi Germany, by using an argument that directly goes against history, in order to discount any idea that goes against your precious golden-calf god notions. I guess I should have expected nothing less (really, I didn't expect anything less, that is what makes it so funny to me).

Look, I don't think you really comprehend the issue here. Fiat money can work, I'm not disputing that. If the supply is limited, and it isn't used as a regressive form of taxation that would otherwise be called theft if it were done privately by a counterfeiter, it can work. The problem isn't that it can't work, for a time, the problem is that given the immense profits of seigniorage, and the weakness of human nature, it is bound to fail, catastrophically.

Can work, as in, how well? Because that is the main issue I want to bring to bear. It works damn well if done in the way that Nazi German, Lincoln with his Greenbacks or certain Colonial money cases were done. Do you agree or disagree with that?

As for the problem of corruption, that is a social issue and separate in a very real way with how well Sovereign Credit works when applied as such. It is an interesting question though. I guess one would have to compare the various systems, see how corruption happens and see how Sovereign Credit type monetary systems compare.

So far, all that I can see is people have been duped by the Banksters no matter what system is in place. The solution then (if one takes it that Sovereign Credit works well, as it does) is education and institutional inertia. Either way, you would have to make more of an argument than what has been presented so far to show that for any such system it is bound to fail, catastrophically. So far the argument is pretty shallow.

Ah, yes. It's that time-travelling band of evil speculators once again! It couldn't have anything to do with the fact that old Bob Mugabe figured out that he could impose a practically unlimited rate of taxation on his populace by simply confiscating the few goods and services actually produced in Zimbabwe - by paying for them in fiat money. Wait... where did those speculators actually get the Zimbabwe dollars to short? The Central Bank of Zimbabwe? You don't say.

But what did you say Tippit on this matter? From post #1197.

It's probably worth pointing out that Zimbabwe has a credit-based fiat monetary system, albeit with no limitations. My contention is that fiat money systems lead to governments which eventually shrug off such "barbaric" limitations anyway.

In point of fact, I am not sure if Zimbabwe still has a money system based on the same principles as it did when it went through hyperinflation. Let's let that one go for the moment and just concentrate instead on the rest of the statement. It would have been better though to say 'had', unless you know they still have the same money policy.

First off, Mugabe is a racist, murderous, corrupt A-hole, of that there is no doubt. He has made many awful decisions for Zimbabwe. The article by Ellen Brown is trying to show what one of his mistakes was and what he could have done instead. You can not short a currency if it is not convertible to something else, as happens with sovereign credit money. Nice try though Tippit!

That said, the problem with your original quote is that it is so pathetically inept when it comes to history it almost makes me want to laugh. There were speculators massively short selling Zimbabwe dollars, or do you contend that did not happen? If so, please provide evidence or arguments for that assertion that is better then references to time travellers.

As it is, your comments are of a purely speculative nature. Something I see quite a bit of from you. Maybe you should try and time-travel to fix the glaringly obvious mismatch between the facts of the case and your own deluded sound-bite version of history.

You've fallen for a load of pseudo-economic bull ****, and you advocate command and control statism, funded by fiat money, branded as "reform". You also managed to apologize for Schacht, Hitler, and Mugabe, and somehow I am the one who is ignorant of history.

Schact wrote a pretty good book from what I understand (have not read it, the original is in German). He stabilised the mark, got fired by Hitler for not using Feder's ideas and was genuinely interested in the welfare of his country. Hitler followed the ideas of Feder when it came to reviving the German economy and it worked well. I have made zero apologies for anything else either Hitler or Mugabe has done. Nothing, nada, zilch. The comment above in connection to that is of a purely inflamatory nature.

I see no analysis of how any economy I have mentioned operated based on anything remotely like true scholarship. It is like if I said "The Executioner makes a great cake" and your response was "You are apologising for the Executioner! How dare you!" No, I said he makes a great cake. That is all. Your inability or desire to conflate two separate issues is interesting. It tells me you lack rational thought on this matter.

If you do not have anything meaningful to say about a subject, the best policy is to say nothing. Instead, I see you trying to hide behind a smoke-screen of propagandistic statements that call attention to elements that are not germane to the discussion at hand. Par for the course, I am afraid.

Nope. Just as I explained to psion, good money is hoarded because the acceptance of fiat money is forced by definition (by decree). Take away the decree, and sellers will demand real money. Your misunderstanding of this is because you don't account for the seller's preference in a free market of money, only the buyer's.

Take away the decree and it is not money, it is barter (and I have no problem with you or anyone else bartering in whatever items you want (usual caveats apply, no slavery, etc. etc.)). Or how do you intend to solve the problem I issued to you earlier (and you never responded to as far as I can tell) of payment in court. You do believe that contracts should be upheld right? So someone offers in court to settle in gold, "No thanks, have enough of that." How about donkeys? "Naw, have no need of those." But you must except gold, it is so valuable... "Why must I, is there some law that says I must?" No, the market says so!

If we had sovereign credit money (which would, by the way, be sound money), then both sellers and buyers would want to trade in it.

This doesn't make any sense. The Austrians correctly realise that the commodity chosen by the free market to serve as money for over five thousand years of history, is gold. When gold is allowed to serve this function, it's worth more. When it's not, it's worth less. Sometimes, as on the eve of the utter destruction of the global fiat currency system, it begins to assert its historical role as de facto reserve currency in spite of decrees, as it is at this very moment.

Wrong. First off, define free market. According to the people who invented the term, the classical economists, it means a market free of unearned income(reduction of rents). Five thousand years huh, you are not one of those fundies are you who think the Earth was created 6,000 years ago? If so, wow, you really are living in crazy-land.

That people want to convert debt-based money to commodities is not surprising (this is not just happening to gold only by the way). Contrary to that article you linked to recently covering Bill Still, he, I and psionl0 advocate debt-free money (well, I actually have proposed a plan to still have debt-based money that acts in accord with Pennsylvania Banking ideas, but explaining why that would not be a problem is so far beyond your ken I might as well be trying to explain Quantum Mechanics to a three year old). The author did not even get that right.

All money is fiat money. The fiat either comes from society as a whole through custom (the closest to how you want things to be) or is decreed by a government. Either way, by custom or by decree, money is money because of some kind of law.

This fiat of money can be required to be convertible to other things, such as other moneys or commodities, or it can be non-convertible. Money can be composed of various substances. Money can be issued within some kind of limits, or it can be issued with no limits at all. Money can come into existence when a loan is made, or governments can just issue it and perhaps require that that is the only way for the money to be issued. If a government just issues the money, it can be used to pay for goods and services only, or it can be used to fund speculators.

All of the distinctions mentioned above except convertibility are ones you do not touch upon. The only distinction you seem to care about is whether the money is convertible or not (or maybe composed of some substance). The money that people are leaving now is unlimited, debt-based, convertible to other moneys and is being issued in such a way as to increase speculation. The money Bill Still and others advocate for is limited, debt-free, non-convertible and has as a requirement to be spent on goods and services.

The only way that the two types of money are the same is that neither is freely convertible to some commodity. Yet no note of this is made by you. In all other ways they are exact opposites, but because they both are not convertible to your golden calf god, they are, of course, the same. All hail the Golden Molech whose painfully average Priest is Tippit. Kneel before your Babylonian God, Tippit. Kneel low! Scrape on the ground in obeisance to your god...

Give me a break. Melodramatic much?

Perhaps, but it is a good principle. Since you do not care about making sure people are called by their correct name, while I do care if my name is spelled correctly, it seems to me that logic would dictate that I can call you by any name I desire, whereas you would have to stick to just tensordyne, or td, for my name.

I therefore nominate your new name to be Goldtard (shortened to gtard when used as such). That is, unless you find it annoying not to be called by your proper name. If you are annoyed, that would make you a hypocrite. It is your choice, Goldtard or hypocrite. I rather think Goldtard is more becoming myself.

We're not making any progress here, and by citing Zarlenga and his ridiculous take on history, you've effectively disqualified him from making an appearance on my reading list. He's just wrong.

Wow, now you have really shown your hand here. Notice I said before I was reading "Man, Economy, and State". I said I was doing this to be intellectually honest. Zarlenga has probably read more from the Austrian School than you have (not to mentioned the scores of other books and articles he must have had to read to write his book). Why? Because one should look out for views opposite to whatever one has. Read as much as you can, that sort of thing, but especially read from views opposite to one's own.

You are telling me here that you are an ideologue with no interest in seeking alternative views. Well, I guess it makes sense, Cultists are not known for exactly being well rounded.

Can we agree to disagree now?

Why should I agree to disagree? When I see posts that do not make sense to me, I present the best evidence and arguments I can muster and then leave it at that (I throw in some spice of heavy sarcasm too). Agree to disagree is what couples do, or people on the losing side of a debate offer, or... Nope, you make whatever arguments you want, I will make whatever arguments I want. That is free speech, correct?, and I am sure you are all about that. Well, I am too.

Speech away Tippit, oops, I mean Goldtard (my homey theeee Gtaaard! Yeah!). Just be ready if there are others with differing views. No apologies here.