Positive Money. A proposition for money reform

Page 1 of 2 [ 28 posts ]  Go to page 1, 2  Next

Yew
Tufted Titmouse
Tufted Titmouse

User avatar

Joined: 9 Oct 2013
Age: 39
Gender: Female
Posts: 33

24 Nov 2014, 5:15 pm

What do you think about this movement and the issues they address ? http://www.positivemoney.org



The_Walrus
Forum Moderator
Forum Moderator

User avatar

Joined: 27 Jan 2010
Age: 24
Gender: Male
Posts: 6,651
Location: Reading, England

24 Nov 2014, 5:48 pm

I don't want to watch the video. Are they saying that money produced in QE should be given in welfare payments in order to stimulate the economy rather than just given to banks? If so, that seems an eminently sensible policy.



Yew
Tufted Titmouse
Tufted Titmouse

User avatar

Joined: 9 Oct 2013
Age: 39
Gender: Female
Posts: 33

25 Nov 2014, 7:48 am

They want to reform the monetary system so desperate attempts like Quantitative easing wouldn't be necessary.

It seems that cash and digital money, which is 95% now, is two different things. Whereas cash is created by the central banks the digital money is created by the private banks whenever they make loans and the debts keeps circling around.

No one ever made a conscious decision to put that immensely powerful and lucrative function in the hands of private businesses who are responsible to their stockholders only. Just look around you to see the results.

In the 5 years leading up to the financial crisis the amount of money in the economy was doubled without any increase in productive activities, mainly through housing bubbles.

They would like to see the power to create money in the hands of some agency like a central bank who could administer it with the interests of society in mind.
And they would like private banks to function like most people THINK they do, and lend out only what they have.

I have high hopes for this movement and I think none of all the other problems with environment and so on can really be helped unless this fundamental insanity is properly understood and addressed.

It has recently been debated in the British parliament. So maybe spending a few minutes watching videos isn't so bad :wink:



trollcatman
Veteran
Veteran

User avatar

Joined: 21 Dec 2012
Age: 38
Gender: Male
Posts: 2,920

25 Nov 2014, 4:44 pm

Yew wrote:
They would like to see the power to create money in the hands of some agency like a central bank who could administer it with the interests of society in mind.
And they would like private banks to function like most people THINK they do, and lend out only what they have.


But in most places the money is created by central banks, like the European Central Bank. Didn't prevent the crisis for them.
And I think most people know that banks are very leveraged, it's been on the news since 2008 or so. If people still don't know that they have not been paying attention for 6 years.



ripped
Veteran
Veteran

User avatar

Joined: 5 Jan 2013
Gender: Male
Posts: 668

25 Nov 2014, 10:35 pm

Any alternative system to capital financed markets that does not have as its foundation the laws of economics, is just another lesson for the gullible to learn from at their own expense.



Yew
Tufted Titmouse
Tufted Titmouse

User avatar

Joined: 9 Oct 2013
Age: 39
Gender: Female
Posts: 33

26 Nov 2014, 7:29 am

trollcatman wrote:
Yew wrote:
They would like to see the power to create money in the hands of some agency like a central bank who could administer it with the interests of society in mind.
And they would like private banks to function like most people THINK they do, and lend out only what they have.


But in most places the money is created by central banks, like the European Central Bank. Didn't prevent the crisis for them.
And I think most people know that banks are very leveraged, it's been on the news since 2008 or so. If people still don't know that they have not been paying attention for 6 years.


According to this podcast http://bryancallen.com/2014/06/02/ep126-ben-dyson/
It is only a small fraction of money in the economy that is created by the central banks, like 3%.
The rest is in effect created by the private banks through that risky leverage.

I don't think most people realize that loans are actually money creation, and private banks thus are allowed to do what everyone else would go to jail for.

I know I never thought about it like that and it's pretty mind boggling stuff. That's why I'm trying to share in in a forum of intelligent people.



ripped
Veteran
Veteran

User avatar

Joined: 5 Jan 2013
Gender: Male
Posts: 668

26 Nov 2014, 7:59 am

I get a loan for a house. The house is worth the money I borrow.

The bank borrows the loan money from the money market and lends it to me.

Over the life of the loan, the loan is paid back, plus interest.


At what point did the bank "create" money?



Yew
Tufted Titmouse
Tufted Titmouse

User avatar

Joined: 9 Oct 2013
Age: 39
Gender: Female
Posts: 33

26 Nov 2014, 8:16 am

ripped wrote:
Any alternative system to capital financed markets that does not have as its foundation the laws of economics, is just another lesson for the gullible to learn from at their own expense.


What exactly do you mean and why is your avatar so distracting ? :wink:

Positive Money was founded by economists who took a long time to study the laws of economics both in theory and how they actually work, which is not necessarily the same.

They do not want to reform how the system works, only who controls the system, which effects everyone, and their motives.

My own personal "taste" for a money reform would be much more radical, resource based and utopian. But we all know how far such fringe hippie ideas go, all the good intentions usually dies from the lack of money.

I am fascinated by the movement because it offers a shift in perspective, an explanation of the miserable state of things and mainly because I think it has the potential to unite very different groups of people and thereby make a real difference.

Actually, what they propose would be in the interest of everyone except the small minority that milks the current system relentlessly. From the Environmentalists to those who believe in the Free Market.



Yew
Tufted Titmouse
Tufted Titmouse

User avatar

Joined: 9 Oct 2013
Age: 39
Gender: Female
Posts: 33

26 Nov 2014, 8:22 am

ripped wrote:
I get a loan for a house. The house is worth the money I borrow.

The bank borrows the loan money from the money market and lends it to me.

Over the life of the loan, the loan is paid back, plus interest.


At what point did the bank "create" money?


When the worth of the house increased because the banks approved too many loans and thereby increased the demand for houses. The interest is also an increase in money not corresponding to any productive activity. It is this spiral that forces unlimited growth.

The only thing in the real world that has unlimited growth is cancer cells.



ripped
Veteran
Veteran

User avatar

Joined: 5 Jan 2013
Gender: Male
Posts: 668

26 Nov 2014, 10:25 am

Yew wrote:
ripped wrote:
I get a loan for a house. The house is worth the money I borrow.

The bank borrows the loan money from the money market and lends it to me.

Over the life of the loan, the loan is paid back, plus interest.


At what point did the bank "create" money?


When the worth of the house increased because the banks approved too many loans and thereby increased the demand for houses.

OK. With you so far.

Yew wrote:
The interest is also an increase in money not corresponding to any productive activity.

The interest is the premium one pays for the privilege of using another person's money.
Yew wrote:
It is this spiral that forces unlimited growth.


Not if your folks have their way apparently. :roll:



Mukherjee80
Raven
Raven

User avatar

Joined: 2 Oct 2012
Age: 39
Gender: Male
Posts: 123

30 Nov 2014, 6:51 am

ripped wrote:
I get a loan for a house. The house is worth the money I borrow.

The bank borrows the loan money from the money market and lends it to me.

Over the life of the loan, the loan is paid back, plus interest.


At what point did the bank "create" money?


The bank does not borrow money from the money market. That is just an assumption that you (and most other people) make, and one that monetary reform groups (like Positive Money) are trying to get people to understand is incorrect.

When you get a loan from a bank, the bank creates the money that it loans to you. The money comes into existence by virtue of the bank giving you a loan.

On the other hand, when governments borrow money, they do borrow from the money markets. But how did that money come into existence in the first place? By private individuals and businesses taking out loans, that's how.

In other words, our money supply depends on private individuals and businesses going into debt. This is why governments are so often so keen to encourage more private borrowing, and why the M3 money supply for each country is so similar to the level of private debt in that country.

If you doubt this, the Positive Money website offers the evidence - via the Bank of England's own website:

"In the modern economy, most money takes the form of bank deposits. But how those bank deposits are created is often misunderstood: the principal way is through commercial banks making loans. Whenever a bank makes a loan, it simultaneously creates a matching deposit in the borrower’s bank account, thereby creating new money.”

“Commercial [i.e. high-street] banks create money, in the form of bank deposits, by making new loans. When a bank makes a loan, for example to someone taking out a mortgage to buy a house, it does not typically do so by giving them thousands of pounds worth of banknotes. Instead, it credits their bank account with a bank deposit of the size of the mortgage. At that moment, new money is created. "


http://www.bankofengland.co.uk/publicat ... 4/051.aspx



ripped
Veteran
Veteran

User avatar

Joined: 5 Jan 2013
Gender: Male
Posts: 668

04 Dec 2014, 11:59 pm

Mukherjee80 wrote:
ripped wrote:
I get a loan for a house. The house is worth the money I borrow.
The bank borrows the loan money from the money market and lends it to me.
Over the life of the loan, the loan is paid back, plus interest.
At what point did the bank "create" money?


The bank does not borrow money from the money market. That is just an assumption that you (and most other people) make, and one that monetary reform groups (like Positive Money) are trying to get people to understand is incorrect.

When you get a loan from a bank, the bank creates the money that it loans to you. The money comes into existence by virtue of the bank giving you a loan.


No it doesn't. This is a confusion between the debit and credit allocations in banks accounting systems.

Mukherjee80 wrote:
On the other hand, when governments borrow money, they do borrow from the money markets.

As do all banks, barring the Federal Reserve.

Mukherjee80 wrote:
But how did that money come into existence in the first place? By private individuals and businesses taking out loans, that's how.


That money came into existence by private individuals and businesses creating goods and providing services. That money is backed by quantifiable resources.

Mukherjee80 wrote:
In other words, our money supply depends on private individuals and businesses going into debt.
This is why governments are so often so keen to encourage more private borrowing, and why the M3 money supply for each country is so similar to the level of private debt in that country.

If you doubt this, the Positive Money website offers the evidence - via the Bank of England's own website:

"In the modern economy, most money takes the form of bank deposits. But how those bank deposits are created is often misunderstood: the principal way is through commercial banks making loans. Whenever a bank makes a loan, it simultaneously creates a matching deposit in the borrower’s bank account, thereby creating new money.”

“Commercial [i.e. high-street] banks create money, in the form of bank deposits, by making new loans. When a bank makes a loan, for example to someone taking out a mortgage to buy a house, it does not typically do so by giving them thousands of pounds worth of banknotes. Instead, it credits their bank account with a bank deposit of the size of the mortgage. At that moment, new money is created. "


This is a partial description of only one side of the transaction.
When a bank writes a loan for a house, it is the bank that pays the vendor and it is the bank who is the holder of the title to that house.
The bank account created in the banks accounting system lists that account as a credit account, as it is an asset account to the banks accounting system.
It is not simultaneously putting money in the vendor's pocket as well as in the buyers pocket.



LoveNotHate
Veteran
Veteran

User avatar

Joined: 12 Oct 2013
Gender: Female
Posts: 6,190
Location: USA

05 Dec 2014, 1:11 am

Yew wrote:
ripped wrote:
I get a loan for a house. The house is worth the money I borrow. The bank borrows the loan money from the money market and lends it to me. Over the life of the loan, the loan is paid back, plus interest. At what point did the bank "create" money?


The FED has an unlimited amount of money, because it creates it out of nothing. It is willing to loan banks this money at very low rates. There is a series of ledger entries for this "money". The end result is some consumer is paying interest on money that was wished into existence.

This is why when I asked my bank last year, why are the rates so low ? They basically said, we don't need your money. We can get all the money we want from the FED at near zero interest.

See here:

Question: I read recently that the “big banks” are borrowing from the Fed at 0.1 percent and buying U.S. Treasuries with the borrowed funds, thereby collecting around 3 percent. Can this possibly be true?

Paul Solman: They have been doing just that, though of late it’s more that, thanks to the Fed,

http://www.pbs.org/newshour/making-sens ... rom-the-f/



ripped
Veteran
Veteran

User avatar

Joined: 5 Jan 2013
Gender: Male
Posts: 668

05 Dec 2014, 1:37 am

LoveNotHate wrote:
Yew wrote:
ripped wrote:
I get a loan for a house. The house is worth the money I borrow. The bank borrows the loan money from the money market and lends it to me. Over the life of the loan, the loan is paid back, plus interest. At what point did the bank "create" money?


The FED has an unlimited amount of money, because it creates it out of nothing. It is willing to loan banks this money at very low rates. There is a series of ledger entries for this "money". The end result is some consumer is paying interest on money that was wished into existence.

This is why when I asked my bank last year, why are the rates so low ? They basically said, we don't need your money. We can get all the money we want from the FED at near zero interest.

See here:

Question: I read recently that the “big banks” are borrowing from the Fed at 0.1 percent and buying U.S. Treasuries with the borrowed funds, thereby collecting around 3 percent. Can this possibly be true?

Paul Solman: They have been doing just that, though of late it’s more that, thanks to the Fed,

http://www.pbs.org/newshour/making-sens ... rom-the-f/


There is a difference between the currency issued by a federal reserve and the value of that currency.

In common parlance, money and currency mean the same thing, but in economics they are not.

But there is no sense in talking economics to someone who clearly knows nothing about it.



LoveNotHate
Veteran
Veteran

User avatar

Joined: 12 Oct 2013
Gender: Female
Posts: 6,190
Location: USA

05 Dec 2014, 1:52 am

ripped wrote:
There is a difference between the currency issued by a federal reserve and the value of that currency.

In common parlance, money and currency mean the same thing, but in economics they are not.

But there is no sense in talking economics to someone who clearly knows nothing about it.


If you knew what you were talking about then you wouldn't be saying silly stuff like "banks don't create money".

The "Money Creation" wikipage:
http://en.wikipedia.org/wiki/Money_creation

The federal reserve is not issuing currency; in this context it is issuing money. Electronic credits. See first paragraph in image from wikipedia. And banks create money by cascading fractional reserve lending.

Image