Credit deflation and the reflation cycle to come (part 9)

[goldbug9999]

46 minutes ago, PETR4 said:

Basically he can't come out with the truth that fiat money is "made" at zero cost. You can imagine the calamity it will cause when all the interest groups realise the government can give them money for free because they are "worth it"!

It's all part of the slight of hand that fiat money has value. Issuing money as loans locks in the value proposition of ensuring the money is put to productive use. Whether that is right or wrong is a large debate on it's own.

The way I look at it is that issuing new money as credit creates the illusion of maintaining currency scarcity because the assumption is that the debt will be paid back at some point so there the concept that it is "bringing forward" consumption - that we spend today but repay tomorrow thus restoring the integrity of the currency. But of course we all know this almost never actually happens.

Now that we routinely issue ever more credit the illusion that it will ever be repaid is all that remains of a wafer thin veneer of plausibility that we are doing anything other that outright money printing. What we have now though is actually worse than out right printing - we are increasing the amount of currency in circulation and we have to rent that money (in the form of interest) from the banks. I think the way to go is to scrap the credit system and just have a statutory money creation rate of say 5% GDP which the government can issue and spend.

Edited May 4 by goldbug9999

[reformed nice guy]

19 minutes ago, Funn3r said:

my children are immigrants (from UK gone somewhere else) and it is all working fine for them and adding value to the places they now live in. 

Some calculations put a lifetime average wage of £45-50k being required to break even in terms of net contributions, high due to the NHS.

Most immigrants don't contribute enough over their lifetimes so don't add value.

That is the biggest gripe.

Most can't articulate that but know it when they see declining public services and a reduced standard of living.

If the average immigrant in aggregate contributed much more than they consumed then the country would become wealthier (the middle east expat model)

 

Edited May 4 by reformed nice guy

[Errol]

26 minutes ago, Funn3r said:

What is actually wrong with "immigrants"? Is there some sort of natural law that says wherever you're born, you have to live your life? What if you don't like it and prefer somewhere else?

As I've said many times both my children are immigrants (from UK gone somewhere else) and it is all working fine for them and adding value to the places they now live in. 

How many? What criteria?  etc.

We should only let in those with money already and those who have specific skills that we need. And everyone should be fully health screened - otherwise you might just be creating a massive health expense.

[Alifelessbinary]

5 hours ago, ThoughtCriminal said:

China's high speed rail network. Only took them 12 years to build 28000 miles of track.

HS2 was announced in 2013, projected to be finished by 2033. Maybe. So 20+ years to build 140 miles of track Vs 12 years to build 28000 miles of track. Same applies to every other area of infrastructure.

I also learned recently that China builds it's merchant and fishing fleet for dual purpose. So their fishing vessels and cargo ships can be quickly fitted with missile launchers and guns. They also have reinforced decks so they can become troop carriers and assault ships. So their navy isn't 370 ships, it's around 38000.

It's 200 BC and the West is Greece, Asia is Rome.

I seen this map quite a few time recently and while an impressive feat, it’s not comparable to the shambles that is HS2. It’s probably better to compare it the UK during the Industrial Revolution which was probably built at a comparable speed when comparing technology.

From my view HS2 shows the downsides of democracies when it comes to large infrastructure projects. Most of the cost overspend is caused by CPO and tunnels to avoid nymyism. When the railway was first built in the UK only the lords were able to demand changes to avoid their estates. The peasants were just turfed out the way with minimal compensation or fuss.

BRICS will continue to see considerable growth over the next few decades, they are just hard to invest in due to the scale and immaturity of their exchanges. While the West might be struggling I still think the S&P500 will be all the BRICS exchanges over the next 40 years.

Lots of BRICS chat just not many investment opportunities. Of the bunch I probably prefer India at the moment, although they’ve got a long way to go.

 

[M S E Refugee]

Can anyone briefly explain MMT?

The only answers you receive from the proponents of MMT basically amount to gaslighting, they make out you're thick whilst giving you some garbled nonsense about it being impossible to go bankrupt if you are the World's reserve currency or issue debt in your own currency.

I think Jared Bernstein's explanation was probably the most coherent answer so far that I have heard, with regard to MMT.

Bitcoin another concept that I can't get my head around, I just don't see the utility in it.

 

Edited May 4 by M S E Refugee

[goldbug9999]

8 minutes ago, M S E Refugee said:

Bitcoin another concept that I can't get my head around, I just don't see the utility in it.

Happy to debate that in the appropriate thread

 

Edited May 4 by goldbug9999

[PETR4]

11 minutes ago, M S E Refugee said:

Can anyone briefly explain MMT?

The only answers you receive from the proponents of MMT basically amount to gaslighting, they make out you're thick whilst giving you some garbled nonsense about it being impossible to go bankrupt if you are the World's reserve currency.

I think Jared Bernstein's explanation was probably the most coherent answer so far that I have heard, with regard to MMT.

Bitcoin another concept that I can't get my head around, I just don't see the utility in it.

 

The wikipedia page on Modern Monetary Theory is fairly expansive 

https://en.wikipedia.org/wiki/Modern_monetary_theory

As a quick definition, this paragraph in the section "Interaction between government and the banking sector" is pretty good:

"A sovereign government typically has an operating account with the country's central bank. From this account, the government can spend and also receive taxes and other inflows.[33] Each commercial bank also has an account with the central bank, by means of which it manages its reserves (that is, money for clearing and settling interbank transactions).[48]

When a government spends money, its central bank debits its Treasury's operating account and credits the reserve accounts of the commercial banks. The commercial bank of the final recipient will then credit up this recipient's deposit account by issuing bank money. This spending increases the total reserve deposits in the commercial bank sector. Taxation works in reverse: taxpayers have their bank deposit accounts debited, along with their bank's reserve account being debited to pay the government; thus, deposits in the commercial banking sector fall"

That wiki page will be tough going to anyone who isn't familiar with all of central, investment, commercial and retail banking - and to be honest who is?! 

[sleepwello'nights]

Just now, M S E Refugee said:

Can anyone briefly explain MMT?

The only answers you receive from the proponents of MMT basically amount to gaslighting, they make out you're thick whilst giving you some garbled nonsense about it being impossible to go bankrupt if you are the World's reserve currency.

I think Jared Bernstein's explanation was probably the most coherent answer so far that I have heard, with regard to MMT.

I've asked in the past the question "what is money" and never had a reply. 

It has several functions which is maybe why no one has tried to answer the question I posed. The issue with MMT is that it ignores one of the functions of money, which is that money is a mechanism to ration resources. MMT supposes that resources are unlimited and giving people more money will allow them to consume the resources they want/need without giving any thought on how to provide or produce those resources.

[M S E Refugee]

5 minutes ago, PETR4 said:

The wikipedia page on Modern Monetary Theory is fairly expansive 

https://en.wikipedia.org/wiki/Modern_monetary_theory

As a quick definition, this paragraph in the section "Interaction between government and the banking sector" is pretty good:

"A sovereign government typically has an operating account with the country's central bank. From this account, the government can spend and also receive taxes and other inflows.[33] Each commercial bank also has an account with the central bank, by means of which it manages its reserves (that is, money for clearing and settling interbank transactions).[48]

When a government spends money, its central bank debits its Treasury's operating account and credits the reserve accounts of the commercial banks. The commercial bank of the final recipient will then credit up this recipient's deposit account by issuing bank money. This spending increases the total reserve deposits in the commercial bank sector. Taxation works in reverse: taxpayers have their bank deposit accounts debited, along with their bank's reserve account being debited to pay the government; thus, deposits in the commercial banking sector fall"

That wiki page will be tough going to anyone who isn't familiar with all of central, investment, commercial and retail banking - and to be honest who is?! 

I suppose what I'm getting at is, how should Jared Bernstein have answered the journalist's question?

[DurhamBorn]

1 hour ago, goldbug9999 said:

The way I look at it is that issuing new money as credit creates the illusion of maintaining currency scarcity because the assumption is that the debt will be paid back at some point so there the concept that it is "bringing forward" consumption - that we spend today but repay tomorrow thus restoring the integrity of the currency. But of course we all know this almost never actually happens.

Now that we routinely issue ever more credit the illusion that it will ever be repaid is all that remains of a wafer thin veneer of plausibility that we are doing anything other that outright money printing. What we have now though is actually worse than out right printing - we are increasing the amount of currency in circulation and we have to rent that money (in the form of interest) from the banks. I think the way to go is to scrap the credit system and just have a statutory money creation rate of say 5% GDP which the government can issue and spend.

2% worked for a long time,5%+ now is whats causing the problem.We dont produce enough for that (mainly because we stopped producing energy).Iv got some huge equations on it of course,its the basis of macro strategy.Another huge problem now is the multipliers are doing the damage.For instance the printed money is all going to the none producing  instead of the productive.BOE and economists think the invisible hand of the economy will respond with extra production,but its cannot because we dont producue the inputs ourselves,and the EMs wont accept being fleeced 5%+ a year anymore.

 

[goldbug9999]

10 minutes ago, DurhamBorn said:

2% worked for a long time,5%+ now is whats causing the problem.We dont produce enough for that (mainly because we stopped producing energy).Iv got some huge equations on it of course,its the basis of macro strategy.Another huge problem now is the multipliers are doing the damage.For instance the printed money is all going to the none producing  instead of the productive.BOE and economists think the invisible hand of the economy will respond with extra production,but its cannot because we dont producue the inputs ourselves,and the EMs wont accept being fleeced 5%+ a year anymore.

 

5% was just a random number I picked out the air, its more the concept of just creating the money outright without credit.

[Long time lurking]

4 hours ago, Chewing Grass said:

Now everyone is skint with zero equity in their tin the car market will collapse

I would not be to sure about that ,second hand cars were very cheap for the best part of a decade until the coof hit 

The lease market is dead now ,but it`s that market that fed into the second hand market ,it was the sheer volume that lowered prices ,there will be a correction but, my money is on far lower volumes will put a floor under the market above what we use to see in the second hand market 

I hope i`m wrong  i`m going to need a new car sooner rather than later and it wont be "new"

[Long time lurking]

21 minutes ago, DurhamBorn said:

2% worked for a long time,5%+ now is whats causing the problem.We dont produce enough for that (mainly because we stopped producing energy).Iv got some huge equations on it of course,its the basis of macro strategy.Another huge problem now is the multipliers are doing the damage.For instance the printed money is all going to the none producing  instead of the productive.BOE and economists think the invisible hand of the economy will respond with extra production,but its cannot because we dont producue the inputs ourselves,and the EMs wont accept being fleeced 5%+ a year anymore.

 

Your having a laugh Dave reckons we  got loads of money 

 

[PETR4]

37 minutes ago, sleepwello'nights said:

I've asked in the past the question "what is money" and never had a reply.

I'll have a crack at this question 

At it's core it is just the accounting system of who owns what value* to whom. It only works because of legal tender laws; government demanding taxes in their own money and when you do work you get given money to account for the effort you put in for the person / organisation who gave you the cash.

*in terms of energy and resources.

The dictionary deffinition is "a current medium of exchange in the form of coins and banknotes; coins and banknotes" which for me is a description of what the medium of exchange is, not the explantion of what the medium of exchange is.

[PETR4]

43 minutes ago, M S E Refugee said:

how should Jared Bernstein have answered the journalist's question?

"why are we borrowing money in a currency we print ourselves?"

For me the answer is because Bankers control the money supply. If the money supply was controlled by farmers, coal miners or hookers the financial system would look very different.

[AlfredTheLittle]

22 minutes ago, Long time lurking said:

Your having a laugh Dave reckons we  got loads of money 

 

Give it a few more years of splashing it around and £3 billion will be a couple of loaves of bread

[AlfredTheLittle]

1 hour ago, reformed nice guy said:

Some calculations put a lifetime average wage of £45-50k being required to break even in terms of net contributions, high due to the NHS.

Most immigrants don't contribute enough over their lifetimes so don't add value.

That is the biggest gripe.

Most can't articulate that but know it when they see declining public services and a reduced standard of living.

If the average immigrant in aggregate contributed much more than they consumed then the country would become wealthier (the middle east expat model)

 

The same applies to everyone, not just immigrants - not many have a lifetime average wage of £50k as the average is closer to £30k. It's just another part of the government's basic mismanagement of the country, both their failure to secure the borders, and their failure to create a productive economy.

[goldbug9999]

1 hour ago, PETR4 said:

"why are we borrowing money in a currency we print ourselves?"

Because this way we have to pay rent on all the money in existence to the banks.

[Long time lurking]

1 hour ago, sleepwello'nights said:

I've asked in the past the question "what is money" and never had a reply. 

It has several functions which is maybe why no one has tried to answer the question I posed. The issue with MMT is that it ignores one of the functions of money, which is that money is a mechanism to ration resources. MMT supposes that resources are unlimited and giving people more money will allow them to consume the resources they want/need without giving any thought on how to provide or produce those resources.

Where MMT falls over is simple ,you would be relying on governments to be responsible/prudent etc,where in reality it would be a race to see who could print the fastest 

Creating money via debt is what i would call the safety valve ,which discourages the above occurring ,,ask Zimbabwe etc 

I think China has the nearest we will ever come to seeing MMT where by the major retail banks are government owned  and the currency is not floated RMB ,money is still created via debt the same as in the west but that debt is almost all held within the country ,then they mainly use these banks to finance their own industries/infrastructure ,whilst the smaller retail/private banks finance private/personal lending, how do they mange to control it ,,they still hang bankers that go rouge 

[Noallegiance]

3 hours ago, Funn3r said:

What is actually wrong with "immigrants"? Is there some sort of natural law that says wherever you're born, you have to live your life? What if you don't like it and prefer somewhere else?

As I've said many times both my children are immigrants (from UK gone somewhere else) and it is all working fine for them and adding value to the places they now live in. 

Adding value can be subjective.

How many of the millions of additions to GB in the last 20 years add needed goods and services to our economy that improve our output and living experience?

At the minute it feels like the UK establishment is printing currency and humans.

Edited May 4 by Noallegiance

[Noallegiance]

1 hour ago, PETR4 said:

I'll have a crack at this question 

At it's core it is just the accounting system of who owns what value* to whom. It only works because of legal tender laws; government demanding taxes in their own money and when you do work you get given money to account for the effort you put in for the person / organisation who gave you the cash.

*in terms of energy and resources.

The dictionary deffinition is "a current medium of exchange in the form of coins and banknotes; coins and banknotes" which for me is a description of what the medium of exchange is, not the explantion of what the medium of exchange is.

For me, money is the tool that allows exchange of value to occur. What is value in a human system? Worthwhile human effort and time that produces something that's needed by one of a million markets. When the human input loses value, the perception of value is warped over time. Combine that with credit and it amounts to a lot of valueless shit.

Credit is the bastardisation of money. The con man's money. Precisely because there's no human value in it's production. Like Bitcoin. Buy a couple of computers and press go. No human effort. It's exactly why AI art is bollocks. There's no time and effort in it. It has no value. The logical endpoint of that is computers trying to swap something it created in 0.2 seconds for something else some other computer created in 0.2 seconds, except there would be no need because it could do it itself. The value is entirely eradicated.

Value is held both in utility and in human achievement. Hence gold's intrinsic value. It takes massive amounts of time and effort to produce it while at the same time being indestructible, uncopyable and useful.

We have lost the value of and within ourselves. We're more valuable than we appear to collectively believe.

[Majorpain]

2 hours ago, sleepwello'nights said:

I've asked in the past the question "what is money" and never had a reply. 

It has several functions which is maybe why no one has tried to answer the question I posed. The issue with MMT is that it ignores one of the functions of money, which is that money is a mechanism to ration resources. MMT supposes that resources are unlimited and giving people more money will allow them to consume the resources they want/need without giving any thought on how to provide or produce those resources.

Store of value.

MMT steals money from the economy of money by diluting it, but it doesn't expand the pot, it merely shuffles the wealth around.

Otherwise everyone would be printing themselves rich!

[wherebee]

5 hours ago, sleepwello'nights said:

I've asked in the past the question "what is money" and never had a reply. 

It has several functions which is maybe why no one has tried to answer the question I posed. The issue with MMT is that it ignores one of the functions of money, which is that money is a mechanism to ration resources. MMT supposes that resources are unlimited and giving people more money will allow them to consume the resources they want/need without giving any thought on how to provide or produce those resources.

This.  MMT is basically communism by banking. 

It ignores the fact that people will not work (put energy into a task) unless they can get back something of value.  If currency is printed at will under MMT, people will quickly work out that energy in from them =/= energy out they get.  They will stop working.  At which point communism starts to use guns on the workers.  Always happens.

Imagine two countries, the UK and Australia.  UK adopts MMT and starts to print pounds non stop to pay for everything.  Australia doesn't.  UK wants to buy copper from Australian mines to make lights work.  Australian mine owner says 'wotcha got to pay with'.  UK says - here, a billion quid.  Australian miner say.... er, nah, it's worth nothing mate.  Chinesey dude over there is paying me in gold.  Bye!

 

And the lights go out in the UK

[Mapper]

I know people on here get it, but the average person does not, so I think it is always worth reminding ourselves of.

Doesn't matter how much "money" anybody has without the energy and natural resources to back it up.

It's tragic enough that most people think money grows on trees, but they think energy does too.

[Errol]

6 hours ago, wherebee said:

Imagine two countries, the UK and Australia.  UK adopts MMT and starts to print pounds non stop to pay for everything.  Australia doesn't.  UK wants to buy copper from Australian mines to make lights work.  Australian mine owner says 'wotcha got to pay with'.  UK says - here, a billion quid.  Australian miner say.... er, nah, it's worth nothing mate.  Chinesey dude over there is paying me in gold.  

This is the problem the West now has with Russia and the BRICS nations.