What is cash money~?

  By Mystic | August 1, 2012 - 02:10 | ,

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Written by: Mystic on August 1, 2012.
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  • Anne Panne

    The banks pushing to abolish the money tokens, as electronic money only cost the energy use of the computer and index finger.
    Government want to abolish the money tokens because it is easier to keep track of electronic money – or so they claim.

    Anyway money tokens can become worthless without the currency becoming worthless:
    http://translate.google.no/translate?sl=no&tl=en&js=n&prev=_t&hl=no&ie=UTF-8&layout=2&eotf=1&u=http%3A%2F%2Fe24.no%2Fmakro-og-politikk%2Fhvor-er-729-mill-siste-sjanse-for-aa-bytte-gamle-sedler%2F20238699&act=url

    • http://overthepeak.com/wordpress/ Mystic

      The government want it all computered up, because they can lay their taxing hands on it easier then.
      Fortunately, they do not have the brains to set up the necessary system.

  • joebhed

    Nick,
    Cash is King.
    But money is money, as you say.

    In the old days, before electronic money, Dr. Irving Fisher, as author of the book on 100 Percent Money and advocate for full-reserve banking, used to explain there were only two kinds of money.
    Pocketbook money – Cash, the folding type, as you say – and checkbook money. Both only become “money” by action of the private bankers – even back then.
    Checkbook money could be saved into an account and then invested and do many wonderful things.
    Thus Fisher’s solution for achieving the fully-reserved basis for bank-lending was to have the government print up CASH for the “un-reserved” balance in checking accounts, and place this CASH into the vaults of the banks – being collateralized as owing to the Treasury.
    At that time, there would be no more money in circulation than the day before.
    All the loans in existence would be backed by real money – as if it had been created in the first place.
    And the GOV was responsible for additional CASH monies to accommodate growth and lending.

    All the AMI has done is to advance the technology to that used today, to the same end.
    It is often worth considering when discussing modern money mechanics whether, and how, this would work in an ALL-CASH rather than a CASH-LESS
    monetary economy.
    It helps to see a little beyond the bookkeeping.
    Thanks.

    • lgrinaker

      As it is now – even with the Fed as the only creator of USDs – the “+X bit of accounting” that all bank deposits, or “claims,” lead to – the Fed is at the mercy of “claims” made by banks via lending.

      For a “claim” created with a bank’s creation of a loan/deposit, can call upon the Fed to then – *subsequent* to the loan/deposit creation – create a USD (even if, technically, a USD that only exists temporarily, until the loan is paid back).

      At this point, due to overdraft protection *always* provided by the Fed in order to keep the machine running, the Fed is, by policy, automatically at the mercy of the deposits (or “claims/demands for USDs”) made when loans are made by commercial banks.

      ~~~~

      That is a very sobering thought.

      Linda

      • lgrinaker

        I hope Jetser makes a post as well at some point, featuring a solely private banking system without the backstop of the Fed.

        Whether folks ultimately favor one alternative system over another, it would be nice to get a better feel for both alternatives – a completely national money system and a completely private money system.

        I imagine that the comparing and contrasting of thoughtful presentations, and subsequent discussions, of both alternatives would help to better learn about each of them.

        (I can continue to follow the work of the MMT folks, and those associated with them, Steve Keen, and/or some of the now MR folks, etc., to continue to get a better feel for how the current “mixed” system is actually structured, and some of the ways they put forward as better ways to work with it.)

        Linda

    • lgrinaker

      Joe,

      The current conflict over healthcare solutions in the U.S. – which I was personally affected by this year, so it’s really “close to home” for me right now – is beginning to come to mind for me along the lines you’ve been talking about.

      The current health care act, which is in the process of slowly, but surely being implemented (a lot of that depending on who gets elected this year, I suppose), is reminding me of our current “mixed” banking system.

      It’s *so* complicated, and most are confused by it, if they’ve tried at all to get a sense of it. Plus, it’s “for profit,” with the private insurance companies involved. And yet, the U.S. govt. will also be playing a large role with subsidies, regulations, etc.

      My fear at this time is that as it is currently designed, it will be something of a mess, not too unlike our current mixed banking system is. We’ve even heard on OTP from a person who lives in Massachussetts, the state that provides the basic model for the national system we’re going ahead with. He couldn’t have been more discouraged by the system they now have there.

      And I can feel myself longing greatly for a much more straight-forward nationalized healthcare system, one that isn’t “for profit” – so that it ast least doesn’t have that extra expense that a private dimension *must* have – as well as one that is far more streamlined and far more easy to explain and administer than what is currently being rolled out.

      I mean, heck, Mystic doesn’t seem any worse for wear, , ;-).

      That analogy is beginning to come up for me (and in a very personally meaningful way) in light of you bringing up the system you advocate for our banking, and overall monetary system.

      Linda

      • joebhed

        Linda,
        Having lived in Canada for nine years long ago, my position is that the good ole USA will never approach its potential greatness until we have universal health care.
        And, like my Dad told me about peace, the environment and social justice, we will never have ANY of them until we take back the money system.
        Plain and simple.
        Yes, the Kucinich Bill (he also sponsored the Universal Health Care Bill) contemplates funding our right to a healthy America.
        Thanks.

    • http://overthepeak.com/wordpress/ Mystic

      I did not immediately see the advantage of the Fisher idea……but I am working on it. One question comes up – Would they destroy the vault cash, as the loans are paid back~?

      I shall give the `all cash` thing a run through the mystic mind ….. but, a problem comes up first …… what is `cash`~? (just something would do to start with, eh~!?)

      • b blackstone

        The cash thing is confusing me so I am going to ignore it.
        I think I get the Fisher bit,but not sure.
        found this link

        http://www.monetary.org/intro-to-monetary-reform/faqs

        9
        But under the American Monetary Act, since it’s now money, those monies will not go out of circulation the way the credits did. They are repaid to the government in satisfaction of the debt the banks incurred in converting them from credit to money. That goes into a pool which can be used by Congress for the items in Title V of the AMA (as described on pages 8 and 9), or it can even be re-lent to the banks at an adjusted interest rate. Note: this action de-leverages the banks, but does not reduce the money supply.

        modified over simplified diagram

        • joebhed

          very good link.
          very good comment.

          I hope everybody gets that.
          Thanks.

          PS at the AMI site, did you see Yamaguchi’s modeling of the debt-free money system.
          It is very telling indeed.

        • axionication1

          I like your machine ( & comments) bb. When I get a chance I will go back & study these contraptions of yours ( appeals to the ingineer in me).

          • b blackstone

            Hi axion,
            I think a plumber would recognize it as an over complicated home heating system.
            economy=radiator
            banks/ pension funds etc=heaters/coolers depending on interest rate
            government pool= heated/ header tank
            inflation=warmer
            deflation=cooler
            taxation= re circulation pump
            5s creator= mains water

      • joebhed

        The advantage of the 100 Percent Money solution is to both end the risk-factor of fractionally-reserved bank runs (no FDIC) and the moral hazard associated with the privatized privilege of conjuring up national purchasing power ($USD here) and renting it to society.

        Please spend a few minutes on the 1939 Program for Monetary Reform and follow Fisher’s rationale on the advantages of full-reserve banking.

        As to the ‘vault cash – remember, that would never be loaned out, just held as the reserve-backing for all loans that could be made.
        $1 Million Vault cash = $1 Million in loans made.
        It would never be destroyed. It would be part of the permanent money system, augmented annually by government payments of more real money to fund economic growth.
        This gets us beyond that for which Hemphill found the “staggering thought”. We would have a permanent money system.
        Even Milton Friedman supported Fisher’s concept here.

        But the all-cash concept is mucho passe.
        Our national economy is hundreds of times greater.
        All we NEED is to monetize the bank credits and we have reserve-less banking and lending.

        • http://overthepeak.com/wordpress/ Mystic

          I am all thought out, Joe.
          I cannot consider future possibilities at this time.

  • lgrinaker

    “Mobile bits of banks’ accounting” – I love it! “MBBAs”

    So am I “with you” or not when I say this:

    Deposits -

    – as the “key stroking in” of a positive number, standing for X # of “claims on USDs” – which occurs ANY time a deposit is made in any account, including with transfers or loans (doesn’t matter when) –

    …are ultimately “X # of claims” on the “key stroking in” of a positive number made by the Fed, a positive number we happen to call, because it is made by the central bank in the U.S., a “USD”

    And even if we happen to use an “X #” from a deposit in order to demand a tangible “paper USD,” it’s still basically a demand for a positive # created by a nation’s central bank.

    So that it all boils down to “mobile OR electronic bits of accounting.”

    Linda

    • http://overthepeak.com/wordpress/ Mystic

      I would stop you on the first line, at – `claims on USD’s`.
      I don’t think that is necessarily wrong, just maybe not helpful ….. as it tends towards the implication that a USD is something other than a mobile bit of banks’ accounting.
      The `sunset thing` is that we think that cash money is the basis for the accounting, when it is just part of the accounting. The accounting is `the only thing in town`~!

      • lgrinaker

        I did conclude with that, although I wouldn’t blame you for not reading through the whole of the post, ;-). I think what this most signicantly leads me to, however, is what I wrote in response to Joe below, which I’ll repeat here:

        ~~~~

        “As it is now – even with the Fed as the only creator of USDs – the “+X bit of accounting” that all bank deposits, or “claims,” lead to – the Fed is at the mercy of “claims” made by banks via lending.

        For a “claim” created with a bank’s creation of a loan/deposit, can call upon the Fed to then – *subsequent* to the loan/deposit creation – create a USD (even if, technically, a USD that only exists temporarily, until the loan is paid back).

        At this point, the Fed – due to overdraft protection, and even more importantly, due to the Fed’s “discount window,” because these loans last more than 8 hours – *always* makes this ultimate backing available as needed in order to keep the machine running.

        In this way, the Fed, and its “currency creation/issuing power” is, by policy, automatically at the mercy of the deposits (or “claims/demands for USDs”) made when loans/deposits are created by commercial banks.

        ~~~~

        That is a very sobering thought.

        ~~~~

        I think this has led me to conclude what Joe said in a response to me in another thread:

        “And bank lending only relates to reserves as they are created by the CB, through its “discounting” power.”

        Ultimately, loan/deposit creation is a demand upon the CB to use it’s fiat issuing/creating power *after* the fact – with an automated policy in place for the Fed to do just that.

        It’s the tail wagging the dog.

        Linda

        • http://overthepeak.com/wordpress/ Mystic

          I am just not up with this at all.
          Maybe I am tired, but I have read it twice and it doesn’t talk to me.
          I still have the Fullwiler tab open and may video work through it (may not).

          • lgrinaker

            If you were NOT tired at this point, I would be quite surprised…

            No worries, even if we don’t end up quite connecting around this at this time… we might well do so down the line (and if not, so be it, ;-)).

            Linda

        • joebhed

          Linda
          “That is a very sobering thought.”

          This is a staggering thought.
          I thought you knew.

          • lgrinaker

            I’m workin’ on it, Joe. I’m workin’ on it, ;-).

            Have a good night…

            Linda

      • lgrinaker

        But although I do agree with you that it all leads through a whole system of accounting, of nothing more than “+s” and “-s” – and that goes for *all* of it, even when coming to the “end of the line” and the “+s” created by the Fed…

        Although I agree with you on that…I don’t agree that it ultimately “signifies nothing.”

        That is the *definition* of a purely “fiat” currency, is it not?

        And that’s important because you don’t have to worry about running out. It’s simply created with a “keystroke,” after all. It’s that very fact that makes what MMT advocates possible, what Joe advocates possible…

        ~~~~

        But maybe that’s not your point, that the system “signifies nothing,” Perhaps your point is more along the lines of this:

        …that the whole money system, the alpha and the omega of it, the whole system from soups to nuts, including the Fed’s keystrokes – is a “fiat” system, and it’s *that* that gives it any meaning, if it has has any.

        Am I getting closer to what you mean? (or not? ;-))

        Linda

        • lgrinaker

          I think I can find my answer, perhaps, in the word “fiat,” which, I think, includes what both of us *may* be after…

          1. That the whole of the system is important because it is all simply a system of “tallies” that can be virtually infinitely supplied.

          As I just read in a “wiki” article about fiat systems:

          ~~~~

          “King Henry I of England introduced to England a “tally stick system.” It was a form of fiat money denominated on special sticks. The king would split a stick up, send half out into circulation and keep the rest. These sticks were used to ‘tally’ (keep track of) taxes to the king for over 700 years, until the Bank of England purchased and then retired all the tally sticks.”

          ~~~~

          2. A *fiat* system is also meaningful in the sense that the whole system is a govt. initiated system, one in which the govt. has an exclusive role, and presumably, an exclusive power, within in the system:

          “Fiat money is money that derives its value from government regulation or law: the initial value of fiat money is established by government decree.”

          ~~~~

          That’s why I think the ”wagging the dog” aspect of how our current system is apparently operating, at least in terms of the “horizontal,” bank lending side of things, is significant.

          Linda

          • lgrinaker

            Just an aside:

            King Henry I’s use of sticks for his tally system brought to mind the thought:

            Would we be in nearly the mess we are in now with our hard to even fathom current “debt-money” #s in the international system if we didn’t have the computational power of computers to keep it all straight?

            Perhaps, along with other crucial factors, such as the exploding supply of energy coming onto the scene over the past several decades, which can be matched to an exploding amount of “work” we became capable of doing in our modern society… perhaps the almost limitless capacity of our modern computing systems to keep records and to keep them updated and maintained, has been a crucial factor in it’s rampant development too…

            Linda

        • http://overthepeak.com/wordpress/ Mystic

          This is entwining vertical and horizontal again ….. and I am just not up to that.

          A fiat system would be more `government money` not the horizontal banking system.

          ‘Signifies nothing`, is about the banking systems accounting, including its mobile bits. The accounts are not registering things, they are registering concepts.
          Like – The difference between `pounds` weight and the word `weight`.
          Banks are not registering `pounds`, as in 5 pounds.
          They are registering 5 weight. (just a concept).
          The unit USD is not a thing like 5 pounds weight, it is only a concept like weight.
          If you changed 5 pounds weight to … `now all 5 pounds weight is now 10 pounds weight`, you have completely stuffed the entire system …… it is just stupid.
          But you can change USDs to 106 angel wings and it makes no difference to anything.
          The USD is just a name for a unit of account.
          (something like that)

          • lgrinaker

            One problem might be in how we think of “vertical” and “horizontal” aspects of the money system.

            Here’s my take:

            It doesn’t have to do with whether or not the govt. is involved (and, like the M.R. and MMT folks, I am including the Fed as a govt. agency)…

            …but rather with the fact that one aspect, the vertical aspect, involves what is “net *new* money” – the money issued by the Fed and used, or borrowed, by the treasury does *not* carry an obligation to repay it, so that there is a net gain regarding the new money that has been created and stays in the system (taxes may delete some of that out, but not all of it)…

            …and that the other aspect, the horizontal aspect, does *not* involve *net* new money – the portion of the money within the banking system that is issued by the Fed and borrowed by the banking system, *does* carry an obligation to repay it… as such, is considered “temporary” – therefore, no “net” new money (that doesn’t, of course, mean no net new damage…)

            ~~~~

            In both cases, the govt., the Fed, and the power to issue money (or tallies, or +s) is critically involved…

            Without that, there would be no “creation” of money (however temporary) via the creation of loans/deposits at the commercial bank level.

            That operation depends upon the automated process that ensures the Fed will provide the banks with overdraft protection and, most especially, the Fed’s discount window.

            The Fed, has in essence, put its sole power of creating USDs at the command of the lenders throughout the banking system.

            And I think that’s significant.

            And I think that it’s something that might be up for change if the system was known well enough.

            Linda

            ~~~~~~~~~~~~~~~~~~~~~~~~~~~

            Upon later reflection…

            I should amend that last part… I should say that without involving the Fed’s sole power to issue dollars, *I think* the power to lend of the other lenders throughout the banking system would be far more restricted than it is now.

            Would that mean we really would be restricted to “fractional reserve lending” along the conventional models we’ve seen discussed lately?

            (Ah, my little neurons are too tired to have an answer for that – or even a try at an answer for that at the moment, ;-))

            Linda

            • joebhed

              Linda
              What is the M.R. that is with the MMTs above?
              Thanks.

              • lgrinaker

                Hey, Joe.

                That stands for “Monetary Realism” created by the Prag Cap creator, Cullen Roche, and a number of folks who liked a lot about MMT, but in the end, had some significant disagreements as well, and broke off to put together their own ongoing thoughts about our present monetary system.

                Here’s an “about us” page from their site. This page also links to their MR Primer:

                http://monetaryrealism.com/sample-page/

                I’ve long appreciated Cullen Roche’s Prag Cap articles, and he helped me so much regarding a lot about MMT, so although I haven’t spent a lot of time with it, I’m trying to slowly, but surely, learn about their own newly developing take on our system as well.

                Linda

            • http://overthepeak.com/wordpress/ Mystic

              I couldn’t get into this comment because you started by saying that vertical did not have to be government involvement.
              I thought that was the whole big thing point.

              If you (or anyone) want vertical money to be the `non destructible stuff` ……… then I will have to start again here.
              That would be fair enough, as I have not got too far in to it.

              So, if banks created `non destructible stuff`, then banks would be creating vertical money.
              The `vertical` pointing more at the type of money, rather than the provenance of that money~!?

              • lgrinaker

                Hi.

                I said that it’s not a question about govt. involvement because the govt. is crucially involved in money creation regarding both vertical and horizontal money.

                Here’s another way I can think of it. Because the *net* supply of vertical money changes, I can think of the net supply, in a way, as rising and falling, so the vertical, or up and down, direction for the *net* amount is in play.

                As for the *net* supply of horizontal money (involving a temporary increase in the money supply as it is lent out, but decreasing when it is paid back, so no *net* difference), I can think of that as remaining flat, so that “horizontal” comes to mind.

                So, the key to the meaning of vertical and horizontal money is not the involvement of govt. – both involve govt. issuance of money – but only whether or not there is a *net* rise/fall in money supply.

                Fiscal policy involves the net rise and fall of money – vertical money; monetary policy involves no net change of money – horizontal money. Different *kinds* of govt. intervention, but both involving govt.

                Linda

        • http://overthepeak.com/wordpress/ Mystic

          I would only think of it as fiat like that in the wrong way.
          As in, how it really didn’t happen like that.
          As in, if ……………
          The government ordered the banking system to be run that way.
          As in, the government ordered the banking system to be a purely accounting system. Then it would be fiat (by fiat, ordered by the government).
          It didn’t quite happen like that, as in, it wasn’t really ordered …. it more kinda happened and the government didn’t kill anyone for arranging it like that.

          It was just some clever accountants got together and worked a scheme where most of the important parties could come out as winners.
          The important parties went along with it~!

  • windslice

    I have to disagree. Sorry.

    Once the physical cash has been withdrawn from the bank, the bank marks down its vault cash on the asset side and also its liability to pay you that same amount.

    The money no longer features on the bank’s books. And the banking system couldn’t care less what you do with it. The money is no longer part of the banking system.

    Now, who issued that physical stuff? This is done by the sovereign state and, YES, the state actually earns money on this as seigniorage. If you loose the money or it gets burned, then the state effectively makes a profit, as there is no longer any means of redeeming it against the “promise”, “I promise to pay the bearer the sum of ten pounds”, whatever that is worth,

    Is physical money mobile?

    I guess if you term it as being out of the banking system (and indeed off the records, which many prefer, notably the Greeks at the moment).

    Otherwise all the digits flying around are far more mobile.

    • http://overthepeak.com/wordpress/ Mystic

      I don’t really understand your objection Windy~!?

      • windslice

        You want to add a definition of cash as
        “Mobile bits of banks’ accounting”

        But cash, once removed from a vault and is out in some Joe’s pocket, is no longer part of any bank’s accounting system.
        That is why, for example, there is money laundering, because once out of the system it is not easy to get cash back into the banking system.

        So I don’t understand why you want to add a property to cash that it simply does not have.

        • http://overthepeak.com/wordpress/ Mystic

          I don’t consider that I am adding anything to cash.
          I believe that I am reducing it down…..to being only a floating bit of accounting.

          • Anne Panne

            Maybe tangible is the right word? When you have the money in your wallet, it is an asset in your book and a liability in the economy? You credit whatever you did to get the money and debet the cash.

            • http://overthepeak.com/wordpress/ Mystic

              Hmmmm~?
              Your whole comment is clever, but I don’t quite like it (don’t mean it be wrong though).

              When you do your books, you write in the cash on the asset side whether it is in your wallet, or in the bank.

              The `liability in the economy` (and the rest) is too clever for me….. (but it is past my bedtime~!).

              • Anne Panne

                Yes , but the ones in my wallet will only be counted by me and the issuer, not by the bank.

                • http://overthepeak.com/wordpress/ Mystic

                  AnPan,
                  I have concentrated on banks, but overall, what we have is a banking system. Your folding notes are part of that overall system.

                  The combine got going again yesterday. All round us nearly done. Bailing straight away as well~!

                  • Anne Panne

                    I know – it was only an attempt to follow up on the thread.

                    The weather has turned here to – now there is frantic work to make ready for the grass -harvest.
                    We ensilage it and it has to be done in one go or else the result will not be optimal.
                    It’s a load coming off our shoulders, when the winter fodder is indoors.
                    Then there will be the barley harvest, but that’s not crucial for our economy.
                    We own a combine together with two other farms. This arrangement has been going on for two generations and three combines. It works very well as the farms are on different altitudes and therefore different growing schedules.

                    We got a new calf to day – it is the thirtieth calf this year and most of them born the last two months. A lot of work, but very rewarding.

                    • http://overthepeak.com/wordpress/ Mystic

                      I am a vegetarian, so think you are Satan’s sadistic sister.

                      (I am ……. but I don’t~!).

            • windslice

              Nope, can’t see that at all.

              Just because you have an asset doesn’t mean there is a corresponding liability somewhere.

              • Anne Panne

                In fact double entry book keeping demands that it does.

                • windslice

                  Double entry booking keeping is a check to ensure that a transaction has been correctly accounted for.

                  I own a jar of coins.

                  I spend half on a new computer.

                  On my asset side I debit the cash balance by 50% and credit my physical asset ledger by one computer.

                  Where is the demand from double entry book keeping to create a liability?

          • windslice

            I can’t see that this is going anywhere useful.

            A note is a medium of exchange and, in so far as law decrees that it is legal tender for paying your bills, a store of value.

            Although accounting is done in currency units, I don’t see that a bank note, denominated in EUR can be used for accounting purposes in this respect.

  • windslice

    http://www.telegraph.co.uk/finance/economics/9443517/UK-manufacturing-contracts-at-fastest-rate-in-three-years.html

    “Some economists warned that the weak start for the manufacturing sector in the third quarter casts doubt on the UK’s prospects after many forecast a bounceback as businesses made up for lost time from the additional bank holidays.”

    Yeah, right, but what about the “Olympic Effect”? All that massive one-off expense having been plugged into the UK economy over the last couple of years.

    “The ongoing slump in manufacturing is also keeping the pressure on the government to come up with measures to support the economy after it announced a raft of steps to get credit flowing to businesses and consumers.”

    Raft of steps. What a piss-poor metaphor. Roughly on a level with the piss-poor UK economy.

    “The fact that employment levels in Britain have risen over the past few months despite the economic contraction has been one of the big puzzles to economists and central bankers.”

    Well, they should pull their Keynesian fingers back out of their arses and sort out a model which reflects the reality of what is happening.

    “Lee Hopley, chief economist at EEF, the manufacturers’ organisation, said: “The Government will need to return from recess with a lot more clarity around its plans to get growth back on track.”"

    Oh right, these bunch of plonkers wil come back from recessing to spout more garbage along the lines of, “The BoE will be providing even more stimulus and the banks will be told to issue even more loans to get YOUR house prices on the up and up”.

    Oh dear, they still have’t quite got the picture.

    No real production. No real exports. No real wealth.

    The City of London is not going to be able to extract more from the economony and somehow multiply it by fractionally reserving into humongous profits, which can then be taxed an redistributed back to the population.

    They still haven’t got the story.

    If you don’t produce stuff, or dig stuff out of the ground, or steal it from other countries, you are fucked.

    The UK used to do all three. And became overly wealthy.

    Now it can’t do any of them.

  • lgrinaker

    Okay, I’ve now hit up against the question that is *key* for me in this.

    ~~~~

    With the exception of the 8-hour overdraft protection, in its role within the banking system, most especially in its role as “lender of last resort,” and in its role as the sole issuer of US dollars, does the Fed ever *issue* new money for lending to the banks?

    ~~~~

    (And I won’t count the “overdraft protection” that has to be repaid 8 hours later.)

    This is a cloudy question for me because I know “stocks and flows” are involved, and that due to “new” money coming into the system via Treasury payments into the system, that even the overall “stock” is forever growing.

    I think I understand, therefore, that the Fed, due to being the Central Bank, where all of the banks keep their “reserve balances,” would have access to the the overall stock (of tallies) available via all the banks.

    Maybe blackstone and his experiments with stocks and flows and banking would have an answer.

    Or maybe somebody simply definitively *knows*:

    ~~~~

    In it’s role as “lender of last resort,” would the Fed ever be called upon to not simply lend from available stock (of existing tallies, or available “credits”), but to actually call upon its sole power to *issue* new dollars (new tallies) when banks “borrow from the Fed?”

    ~~~~

    (This is a different subject than that of issuing new physical dollars, for I know that those aren’t issued via borrowing. When new physical dollars are sent to a bank, their reserve balance is debited from. And, again, I’m not including the 8 hour overdraft protection.)

    ~~~~

    If the definitive answer to that is “no,” then I will be on the same page with you, Mystic.

    For then, I would agree. If that were the case, I don’t think it would matter whether or not borrowing is done through the Fed at times. I truly could see that as being interchangeable with borrowing from other banks within the system.

    This wouldn’t mean that there aren’t real problems with a banking system like that of the U.S. (not by a longshot), just that that wouldn’t be one of them… the tail wagging the dog as far as the power to issue U.S. dollars…

    Linda

    • lgrinaker

      Oh, my goodness! An answer to my question posed above is beginning to emerge – already!

      ~~~~

      This was totally unexpected, but in listening to the video (in a few fairly short parts on youtube) that Joe suggested to Blackstone, of a presentation by Kaoru Yamaguchi – whom Joe had reminded me made a *huge* difference for Steve Keen, and Keen’s own modeling work – I hear the answer to the question I ask in my comment above.

      And this is actually featuring Keen whom we hear off-camera during the Q & A after Yamaguchi’s presentation, during which Yamaguchi graciously gestured to Keen that he was welcome to take up a question asked from an audience member.

      ~~~~

      The audience member asked if “the money multiplier” model, used in a discussion about “the system of fractional reserve banking” within his old economics textbook, was ever how things actually worked, and if so, when. And as part of his answer to that, Keen gave a very clear answer to my question above:

      ~~~~

      My question:

      “In its role as “lender of last resort,” would the Fed ever be called upon to not simply lend from available stock (of existing tallies, or available “credits”), but to actually call upon its sole power to *issue* new dollars (new tallies) when banks “borrow from the Fed?”

      ~~~~

      That question and answer begins at about 6:40 on this video, Part 6 of Yamaguchi’s presentation. I’ll post that video below.

      And I’ll also point out, once again, the site that Blackstone linked to (and that Joe, in turn, highly recommended):

      http://www.monetary.org/

      ~~~~

      Before I link to Part 6 of Yamaguchi’s presentation, I just want to say that I did, not unexpectedly, have some trouble understanding him this first time through his presentation. But clearly, it’s important work that he’s doing and that he so enthusiastically wants to share. So I’m going to give it some more goes, as well as download his powerpoint presentation (and listen to the interview with him).

      And I’m extremely grateful he and Keen found one another, for that definitely seems like a “match made in Heaven.”

      Anyway, here’s the link to the video that includes the Q & A as I mentioned above. The question that Keen answered was asked at about 6:40.

      (And although this definitely got me started in learning the answer to my question above, I hope I can find out more about it as well…)

      http://www.youtube.com/watch?v=IlZ0S_BV2ws

      Linda

      • lgrinaker

        Ah, and I see the answer was in Scott Fullwiler’s post all along – I just “didn’t have eyes to see.” Well, the truth is that the question hadn’t yet formed for me, ;-):
        ~~~~
        “…As the monopoly supplier of reserve balances (since the aggregate quantity can only change via changes to its balance sheet), it is the central bank’s obligation to ensure the stability of the national payments system. All central bank’s therefore provide reserve balances to their banking systems on demand at a price of the central bank’s central bank’s choosing.
        Note that it cannot be any other way. If the central bank attempted to constrain directly the quantity of reserve balances, this would cause banks to bid up interbank market rates above the central bank’s target until the central bank intervened. That is, central banks accommodate banks’ demand for reserve balances at the given target rate because that’s what it means to set an interest rate target. More fundamentally, given the obligation to the payments system, it can do no other but set an interest rate target, at least in terms of a direct operating target.
        What does this mean for our present context? It means simply that there is no quantity constraint on the quantity of reserve balances the central bank will supply, and thus there is no reserve constraint on a bank or on the banking system’s ability to create loans. Central banks stand ready to provide reserve balances at some price always. They can adjust this price up or down if they are concerned about the expansion of credit or monetary aggregates, and this increase in price can be passed onto borrowers who may then not want to borrow. But this means that the manner in which a central bank can exert control over credit expansion is indirectly through its interest rate target, not through direct control over the quantity of reserve balances.” — Scott Fullwiler
        Linda

        • http://overthepeak.com/wordpress/ Mystic

          Well, if you are happy with that Fullwiler piece, as an answer to your question ………….. then I am happy.

          (Mystic note: You may have to stop again and let all this settle in. Best is to go back through your notes and establish what you have.)

    • http://overthepeak.com/wordpress/ Mystic

      Hello Linda,
      Does the Fed issue new money.
      We could go into the way the Fed sees to it (used to see to it) that their Fed Funds Target Rate (the interest rate) was always hit (but we won’t).

      Would you be happy with – QE is all new money~!?

      • lgrinaker

        I think that’s an excellent next step for me – to learn more about the Federal Funds Rate – how that’s targeted and how it relates to lending by commercial banks.

        I think for the time being, however, I’ll put my “banking lessons” aside, ;-), having learned a lot more than I knew a couple of weeks ago.

        I’ll turn to some other things for a while… letting myself rest from trying to learn new things about this subject, even while letting some of these recent lessons and some of my recent exposure to several new things “sink in,” ;-).

        Thanks, Mystic, for this great “place” to have some room to poke and prod and fiddle, to go through some trial and error, and with others who may want to join in, or who may want to turn to completely different “works in progress,” which I can check out too, ;-).

        I really do think that that can serve to help build some “human capital,” which can happen through the process of learning…

        Linda

      • joebhed

        Far as I know, the Fed, as the CB, never issues new real “money”‘ as we use money.
        Except within the context as mentioned elsewhere that reserves ARE money.
        But when you look in the “accounts” where they count MONEY, none of that was CB created.
        It was all private bank created.
        The Treasury creates/issues the coins.
        The Treasury prints and provides (at printing costs) all paper currency units to the Fed SYSTEM.
        When any “bank” needs currency, it borrows it from its Regional Fed Bank by pledge of collateral.
        At the point that the bank acquires the cash-money currency, it is ‘money’ in the sense of being able to be included in monetary aggregates (so long as it is not ‘vault-cash pledged against required reserves).
        The bank can get its collateral back in trade for the currency to the RegFed, and it would no longer be ‘money’.

        Pretty much the same with QE, only they use electronic money.
        The CB creates the $US balances and ‘trades’ them for assets of the banks, increasing their reserves, almost always as excess reserves.
        Generally accepted, banks cannot spend ‘reserves’.
        When the CB accepted the collateral of ‘other’ private corporations, they made loans that need to be paid back.
        So, for the real economy, no money is created by either the CB or Treasury.
        Far as I can tell…

        • http://overthepeak.com/wordpress/ Mystic

          No. Don’t like that Joe~!
          QE you say CB takes the asset and increases bank’s reserves …… then the – ` banks cannot spend ‘reserves`.
          I have to disagree with this.
          There. I just have~!
          (that would make it so bloody obvious that QE was a farce, that even Fox News would spot it~!?)

          • Joebhed

            Nick,
            You’re right.
            My partial explanation leaves a lot on the table.
            But not on the matter of excess reserves and commercial banks lending .
            I provided somewhere the link to Izabella’s posting on FT Alpha on The Base Money Confusion
            Quoting Peter Stella , former head of Central Banking and Monetary and Foreign Exchange Operations Divisions at the International Monetary Fund:
             
            “”My frustration lies in my inability to explain to
            “sophisticated” people why in a modern monetary system–fiat money,
            floating exchange rate world–there is absolutely no correlation between
            bank reserves and lending. And, more fundamentally, that banks do not
            lend “reserves”.

            Commercial bank reserves have risen because central banks have injected them into a closed system from which they cannot exit. Whether
            commercial banks let the reserves they have acquired through QE sit
            “idle” or lend them out in the interbank market 10,000 times in one day
            among themselves, the aggregate reserves at the central bank at the end
            of that day will be the same.”"

            Even Stella’s explanation goes wanting.
            http://ftalphaville.ft.com/blog/2012/07/03/1067591/the-base-money-confusion/

            But the other side of the QE is that provided to other corporations.
            Here the transactions are more complicated, but the results are the same.

            Excess reserves are in a closed loop, really INCAPABLE of being themselves lent – despite what Stella mis-wrote.
            Thanks.

            • http://overthepeak.com/wordpress/ Mystic

               Even in Fullwiler 5′s …….. it is clear that reserves do get lent out (it is indirect, but they do get lent out).

              There is no difference between QE reserves and Deposit reserves, or sale of a securitized mortgage reserves, or any `cash` on the asset side reserves.

              It is looking like Fullwiler is right, or you are right ……. Would you like to place your bets please~!?

              • lgrinaker

                That’s my take on it too.  In fact, isn’t it cheaper to use reserves from depositors, which is why they are sought out, even if that occurs *after* a loan is made and the proceeds spent by the debtor?  If it occurs afterwards, money coming in from depositors allows the bank to pay off its more expensive loan(s) and, instead, carry a less expensive one – via the interest they pay to depositors.

                From what I’ve been able to gather… because banks *can* borrow as needed, they are not, therefore, restricted in their capacity to borrow.  Even if there are no excess reserves on hand within their own reserve balance, there will be reserves available – at some price, but they’ll be available.

                This is how Scott Fullwiler put it (which makes sense to me):

                ~~~~

                “The most profitable way to do this is to make loans (that are paid back, obviously, so credit analysis is an important part of this) that are offset by deposits, since deposits are the cheapest liability; borrowings in money markets would be more expensive, generally. So, Bank A, if it is not able to acquire deposits is not operationally constrained in making the loan, but it will find that this loan is less profitable than if it could acquire deposits to replace the borrowings.”

                Linda

                • http://overthepeak.com/wordpress/ Mystic

                  Yes, I would nod to that …….. and then say, that there is so much going on, that talking of `before and after loans` is all a probably a bit silly in the real world.

                  Picky is of bank funding in European countries.

                  • lgrinaker

                    And yet isn’t that precisely what Keen’s work shows tends to happen in the real world – that creation of credit money tends to happen *before* the creation of government money, rather than the other way around?

                    From Keen’s site:

                    http://www.debtdeflation.com/blogs/2009/01/31/therovingcavaliersofcredit/

                    “Two hypotheses about the nature of money can be derived from the money multiplier model:

                    1. The creation of credit money should happen after the creation of government money. In the model, the banking system can’t create credit until it receives new deposits from the public (that in turn originate from the government) and therefore finds itself with excess reserves that it can lend out. Since the lending, depositing and relending process takes time, there should be a substantial time lag between an injection of new government-created money and the growth of credit money.

                    2. The amount of money in the economy should exceed the amount of debt, with the difference representing the government’s initial creation of money. In the example above, the total of all bank deposits tapers towards $10,000, the total of loans converges to $9,000, and the difference is $1,000, which is the amount of initial government money injected into the system. Therefore the ratio of Debt to Money should be less than one, and close to (1-Reserve Ratio): in the example above, D/M=0.9, which is 1 minus the reserve ratio of 10% or 0.1.

                    Both these hypotheses are strongly contradicted by the data.”

                    ~~~~

                    The above would still allow for what Scott Fullwiler describes when he writes of the banks at least ultimately favoring deposits due to their being the cheapest form of borrowing for banks - creating the loans and then borrowing (at least partially) to facilitate the drawdown of the proceeds of a loan by the debtor, but still looking for deposits afterwards in order to exchange their more expensive borrowings from other banks or the govt. for the less expensive borrowings from deposits.

                    Apparently what Keen’s modeling shows is that *on aggregate* credit creation tends to come in this way, with the banks making loans, borrowing to fulfill the debtor’s fairly immediate drawdown of the proceeds, and then seeking deposits to take care of the more expensive loans then on the books… that this tendency can be empirically shown to be happening on aggregate.

                    Linda

                    • lgrinaker

                      Boy, I hadn’t tried to read that particular blog post of Keen’s since I first started to fiddle around with this stuff… when was that now?  about 2 years ago?  (sheesh)

                      I didn’t stand a chance with it in those early days.  But today, I was able to find my way through that post pretty well, which was a nice surprise and let me know that I had indeed come quite ways in my understanding since I first began with this stuff, ;-).  I still, no doubt, have a long way to go, but at least I’ve come a long way too, ;-).

                      In that post, he also describes something of the recent history of modern banking as the Central Bank in the U.S. attempted to control inflation, ending in what is now the strategy of targetting the Federal Funds Rate.:

                      ~~~~

                      “…Central Banks would set targets for the growth in the money supply and miss them completely—the money supply would grow two to three times faster than the targets they set.

                      Ultimately, Central Banks abandoned monetary targetting, and moved on to the modern approach of targetting the overnight interest rate as a way to control inflation.[6] Several Central Banks—including Australia’s RBA—completely abandoned the setting of reserve requirements. Others—such as America’s Federal Reserve—maintained them, but had such loopholes in them that they became basically irrelevant. Thus the US Federal Reserve sets a Required Reserve Ratio of 10%, but applies this only to deposits by individuals; banks have no reserve requirement at all for deposits by companies.[7]”

                      ~~~~

                      Linda

                    • http://overthepeak.com/wordpress/ Mystic

                       What is `government money` when it is at home~?
                      Money comes from banks~!

  • lgrinaker

    Hey, Mystic.

    I don’t think this is what you were after with this video (in fact, I’m almost sure it’s not – sorry about that, ;-)). But I’ve gone away and have come back and have had another listen…

    And although I know this is not the intended consequence of your video, ;-), it has helped me to kind of start over, or to get a fresh start…

    ~~~~

    And I’ve done so by beginning to imagine only cash, or paper notes, as the “stock.” I know this is not what we’re dealing with in the “real world.” I know that in the real world, the Fed issues both a bit of paper money, and mostly, by far, electronic money, in the form of “+”s under its asset column and “+”s under its liability column.

    And I know that in the real world these days, “reserve balances” that a bank holds with the Fed are all digital, with “paper money” considered separately and held as “vault cash” when it’s a part of a bank’s holdings.

    ~~~~

    But now, probably tangentially (sp?) inspired by Mystic’s video (I know this isn’t what you were after, Mystic, but maybe that will come in time, or will come via others, ;-)…

    I’m simplifying my “picture” of the banking system, including the Central Bank and the Fed’s involvement by trying to imagine the system with only cash, or paper notes, as the stock of money I’m dealing with (understanding that “vertical” – or “net new money” is continuing to come into the overall banking system due to ongoing Social Security payments, etc., so that the cash money stock continues to grow in that way).

    And I’m just going to play with that for a while, and see if that makes things any easier for me to imagine, as far as thinking about terms such as “reserves” and “deposits” and “borrowing” and “U.S. Dollars” and the Fed’s part in the “horizontal” banking system…

    ~~~~

    In just starting that exercise, a few things are already becoming easier for me.
    It’s now easier for me, for example, to imagine “creating a deposit” on the liability side, along with creating a loan agreement on the asset side.

    As I imagine it now, that can still be done even if only cash is available for lending (rather than electronic versions of dollars) – the act of creating the loan and deposit first, without yet needing to consider cash reserves.

    But, as far as I can imagine so far, it only works if I make the deposit a pencilled in “X claims on USDs”. I cannot imagine that cash in the form of US dollars can simply be created out of thin air to fund the deposit side of the ledger, certainly not by the commercial bank.

    Nor can I imagine any of the “vault cash” being used to fund the deposit at that time, since that would be an existing asset, which wouldn’t work, as far as changing it from an asset to a liability. That would leave the bank’s books unbalanced.

    But creating a deposit as “X claims on USDs” seems to work at this initial stage.

    (Next comes imagining transferring to another bank… That’s part of what I’ll be “stewing on” as I head off, ;-).)

    Anyway, that’s just a beginning, but it’s helping me a great deal…

    Linda

    • http://overthepeak.com/wordpress/ Mystic

      As long as you want to keep folding dollars in mind as `something`, I don’t think I can help you.
      Yes, I know they are treated differently, but I can’t help thinking this is a mental block for you.
      Even if they were vertical folding dollars, they would still not be anything but a contrived exchange medium (tokens, tickets).

      • lgrinaker

        True. I do not know what you’re looking for from me here. I absolutely concede that dollars are made up things; they are human constructs. So about that, I don’t know what else you are looking for.
        That is, indeed, as far as I can tell, what makes them so significant – the govt. can never go bankrupt because dollars can be created freely.
        The other side of that which is very interesting to me at the moment is that the govt., or, in this case, the govt.’s agent, the Fed, is also the monopoly supplier of usd’s; it is against the law for any other entity to actually issue usd’s.
        Now, in getting a better feel for what a deposit is, that it is a “claim upon X # of dollars,” which via policy, the Fed must fulfill, I’ve learned something that had never occurred to me before… namely, that by creating a loan agreement and a deposit, lenders throughout the banking industry, indirectly, have the power to issue usd’s.
        Keen, I thought, describes what that means very well when he said that it used to be that the Central Bank could say to a commercial banker, “Jump,” and the commercial banker would say, “How high?” Now, that’s the other way around. Now, a commercial banker can say to the Central Bank “Jump,” and the Central Bank asks “How high?”
        That is something that had never occurred to me until learning more about what I’ve been learning today. And I am glad I learned it.
        Of course, it may be nothing new to anyone else, so it may be just a boring exercise to have observed me learning about it, ;-). But to me, it made the effort of the last few days very much worth it.
        Linda

        • http://overthepeak.com/wordpress/ Mystic

          All fairy snuff ….. except the deposit thing.
          If you must use that (horrible) `claim on x dollars` …..
          …. Then a deposit is – an increase in the banks claim on x dollars~!!
          (a deposit is a loan to a bank~!)

  • CSArichardo

    Check out wikipedia under money supply. I think it is M0 which includes bank deposits and physical cash at banks but no physical cash at Central banks although it appears that M0 in the UK includes the central bank cash…figure that a non standard definition.

    Hence you cannot swap your paper cash with central bank paper cash since it is not the same money even though it is denominated as the same!! That gives me a head ache…

    • CSArichardo

      Physical cash for me is M1 but I called it M0 in the above comment. Hopefully that is not too confusing. I think Joe agrees with the M1 definition as money except he would also like to see enough physical cash in each bank to back up the deposits even though that physical money would be owned by the central bank and hence not double counted under M1!!

    • http://overthepeak.com/wordpress/ Mystic

      I go on about it being accounting, accounting, accounting.
      ….so Richardo goes on about cash, cash, cash (and then complains about his head-ache~!).

  • CSArichardo

    Sorry to clarify I think cash money is M0, not counting central bank cash money as per the US definition. Including demand deposits makes it M1 which is more the definition I would like to use and appears to be the one Joe likes too.

  • axionication1

    Sheez!!! I will need to quit work to even begin to keep up with you lot ;).

    Strangely enough have had a fair inkling to the reduced ‘acounting’ nature of money for some time
    Perhaps a slipery slope from here (…?)

    • lgrinaker

      ;-)

      Hey, axion…

      Linda

  • Jetser

    I’ve not had time to read all the comments but I’d like to say I fully agree with the video and think it’s a very good explanation. The banks are all systems for accounting for promises, as they are made and delivered upon, and the cash transfers the promises between systems. But it’s all part of a bigger system, which creates the cash.

    So credit and paper money are proof that work (or an asset etc) has been promised. They have value because you can demand the work be done for you when you redeem the promise.

    In a gold standard the cash (when it’s gold coins and not bank notes, which can be part of a gold standard) is proof that work has already been done, because it takes effort to mine the metal. It can’t be proof of “something has been promised” because the metal originates outside the system of promises. When it comes into the system it would have to hit the accounts as a fulfilment of a promise.

    The distinction between the two is significant at the extreme when “the system” breaks down or fails, but I can’t work out if there is any significance generally.

    • http://overthepeak.com/wordpress/ Mystic

      For your `is there significance generally` in this `what is money` stuff~?

      I am thinking that something in the big world has changed / gone wrong …… and something is going to have to give / change (perhaps radically).

      I suspect that I / we are looking to see if it is money that is the thing that is going to have to change, (and if so, what may be possible).

  • Guest

    I like that expanation: cash is just a bit of mobile accounting. Not just because it’s possibly quite accurate, but also because it helps to dispell the idea that physical cash has (or should have) some kind of intrinsic value.

    • http://overthepeak.com/wordpress/ Mystic

      Hello Richard~!
      How / Where are you.
      All mad medical stuff going on here~!
      I still have your box and freezer bag in the back of my car …… maybe next year you will get them back.

      Yes, I was very happy with that `mobile accounting thing` ….. mainly, as you say, to try and wean people off the idea that folding cash money is something special (and, as you say, has some intrinsic value).

      I’ll have to do more videos to keep you involved~!?

      • Guest

        Hi Nick, I’m good and I’m back in France working on the house. I’m trying to keep up with the OTP videos, but we’ve been working late most days so it’s been difficult to keep up. I hired someone to help me, so after 3 summers my new bathroom might actually be complete!!!! (were aiming for early next week!) I might pop by around mid-late September (either on my way to or from Paris when I do the London to Paris bike ride).

      • windslice

        Something has happened to your blog. Seems to have developed into a Twitter.

        Fiat money in all its forms is a creation of the government and bestowed a value as the only acceptable means of paying taxes.

        And, as such, is surely

        - something special. You can’t dump a load of manure, which also has value, on the tax department’s doorstep. A few thousand EUR notes would be very acceptable. And dumping a lump of gold is also not acceptable.

        - an EUR 10 note could have more intrinsic value than a kilogram of gold. Gold could be considered worthless by “the market” tomorrow (most of the gold after it has been refined lies essentially useless in the vaults of banks and companies), but the government would still accept an Italian EUR 10 note as payment for taxes.

        • http://overthepeak.com/wordpress/ Mystic

          I don’t know what your point is.
          The market could say gold is worth buttons.
          The government could say pay your taxes in buttons.
          What is your point~?

  • jonvssocrates

    What is money? Look at what it’s traded for…. Your time and labor. AKA, your life.
    Money equals chunks of life.
    If your skills are worth more than average, you get more life units per hour to trade with.
    When someone steals money from you, they steal hours of your life.

    • jonvssocrates

      In other words, physical dollars are just a record keeping system that you gave 8 hours of your life to someone else’s business and now you can trade your 8 hours of life for something someone else spent hours of their life on.

  • lgrinaker

    I’m going to try this from a different angle:

    In trying to understand a bit better about the U.S. money system, including about how the structure is laid out, what the various factors of the system are, what is distinct about this factor and that factor and that factor, etc., and how they interrelate, while at the same time acknowledging that it’s all a human conjecture…

    …is not so unlike trying to understand a work of fiction, which has a whole made up system within it, a whole made up world. I can look into the structure of that made up world, and all sorts of different aspects about it, all sorts of different characters, etc., and try to get a better feel for this character and that one and how the various characters, etc. interrelate. And I can do that while still acknowledging that it’s a work of fiction.

    Linda

    • lgrinaker

      Later, as a way to simplify the system so that I could better imagine it, I found it helpful to think of money within the banking system just in the terms of paper notes, or cash, or pocket money.

      For example, not having to deal with different versions of money – vault cash, along with electronic reserves (nor the electronic system and its keystrokes for various aspects of the system) helped me to better distinguish from money and other aspects of the system. Doing so helped clarify for me what a deposit is, for example.

      I had to eliminate some things, like “automatic transfers,” but simplifying the system in this way is not a bad exercise, I am finding, to better understand some of the basics. Later, I could probably better imagine the system electronically.

      Linda

    • http://overthepeak.com/wordpress/ Mystic

      But, it is not fiction …… and it wasn’t designed (in one go), it just happened.

      In comments, we have someone saying that money represents work done. That it is a kind of fiction.

      Like Mosler and his points at a ball game. The points are not a fiction, they do represent something, but …….. not much.
      People with enough power can make the points represent something else (but no amount of power can change something like your weight).

      • lgrinaker

        Yes, that’s a limited analogy. It simply speaks of working with a human construct. That one can acknowledge that something is a human construct, and still try to learn about the logic within such a construct and that there are different aspects that are distinct from one another and that they relate in different ways.

        Linda

        • http://overthepeak.com/wordpress/ Mystic

          Gold represented some things…..(hard to find, hard to dig up, rare, pretty, useful etc.).

          • jvs

            Hard to find = more labor/human life time
            Hard to dig = more labor

            • http://overthepeak.com/wordpress/ Mystic

              ….. and a dollar bill~?

        • lgrinaker

          I do like bringing to mind the evolutionary aspect of it. That something may have gotten built up around a few things early on, as needed, and then later adjustments were cobbled together onto the same system here and there, and then more things changed, and further things cobbled together, and so on.

          I think that with the close of the gold window, we, in the U.S., are witnessing the fact that there can be a lag time between some key circumstance in the world changing and the system and the people using it catching up to that change.

          And, in Europe… well, that’s quite a living experiment with system building…

          Linda

      • jvs

        Just because someone with power can steal money doesn’t change what it is. You traded your life for it. If they steal it hasn’t changed what money is, they’ve just stolen some of your life.