Comments on: Money Creation – Where Does the Money Come From? http://www.discusseconomics.com/banking/money-creation-where-does-the-money-come-from/ Join the conversation on a variety of economic and finance discussions. Sun, 05 Feb 2012 11:15:00 +0000 hourly 1 http://wordpress.org/?v=3.3.1 By: Lindsay MacVean http://www.discusseconomics.com/banking/money-creation-where-does-the-money-come-from/comment-page-1/#comment-33658 Lindsay MacVean Thu, 01 Dec 2011 02:15:00 +0000 http://www.discusseconomics.com/?p=163#comment-33658 You are repaying the central issuing bank (of australia in this case). Central banks usually use this money to cover their operating costs and then literally destroy the rest. The only reason they put the interest on the loan is to encourage people to trade so that they can create value to repay the interest and catch up. Its a stimulus method for society. Like I said in my other comment, you could lend $9 against every $1 in your own account, its just you are not as established with the same size and trust record as the bank (I know that sounds ironic in this situation), this means that your borrowers are more like to cash in quicker and do the equivalent to your finances of a run on a bank. I agree with you on the stupidity of deregulation and bullshit risk spreading. A debt is a debt, and you need to manage the risk. Complicating the issue doesn't help, and although I am no expert I am pretty confident that you should never leverage more than about 40% of your asset base. You are repaying the central issuing bank (of australia in this case). Central banks usually use this money to cover their operating costs and then literally destroy the rest. The only reason they put the interest on the loan is to encourage people to trade so that they can create value to repay the interest and catch up. Its a stimulus method for society.

Like I said in my other comment, you could lend $9 against every $1 in your own account, its just you are not as established with the same size and trust record as the bank (I know that sounds ironic in this situation), this means that your borrowers are more like to cash in quicker and do the equivalent to your finances of a run on a bank.

I agree with you on the stupidity of deregulation and bullshit risk spreading. A debt is a debt, and you need to manage the risk. Complicating the issue doesn't help, and although I am no expert I am pretty confident that you should never leverage more than about 40% of your asset base.

]]> By: Lindsay MacVean http://www.discusseconomics.com/banking/money-creation-where-does-the-money-come-from/comment-page-1/#comment-33657 Lindsay MacVean Thu, 01 Dec 2011 02:08:00 +0000 http://www.discusseconomics.com/?p=163#comment-33657 Its not quite repeating itself, because we have never had a such global integration between central banks. I think the solution needs many parts: 1. Change the extreme bonus culture of banks 2. Regulate the banking exchange methods better. 3. Change the intense profiteering culture which has proliferated for the last 50 years and get focused on other more useful key indicators and values. 4. learn to manage risk better as a society, which included understanding the system (this is already happening everytime some one discusses this issue). 5. teach basic financial skills to kids in schools 6. Stop focusing on currency as the only means of exchange. Its not quite repeating itself, because we have never had a such global integration between central banks.

I think the solution needs many parts:

1. Change the extreme bonus culture of banks
2. Regulate the banking exchange methods better.
3. Change the intense profiteering culture which has proliferated for the last 50 years and get focused on other more useful key indicators and values.
4. learn to manage risk better as a society, which included understanding the system (this is already happening everytime some one discusses this issue).
5. teach basic financial skills to kids in schools
6. Stop focusing on currency as the only means of exchange.

]]> By: Lindsay MacVean http://www.discusseconomics.com/banking/money-creation-where-does-the-money-come-from/comment-page-1/#comment-33656 Lindsay MacVean Thu, 01 Dec 2011 02:03:00 +0000 http://www.discusseconomics.com/?p=163#comment-33656 Like I said in my other comment, I think there is a fallacy here. I do not believe there is a plan, but merely a complex system of monetary lending which most people dont understand and therefore they fall foul of it. If everyone understood the role that banks actually play, perhaps things would be a lot better. Like I said in my other comment, I think there is a fallacy here. I do not believe there is a plan, but merely a complex system of monetary lending which most people dont understand and therefore they fall foul of it. If everyone understood the role that banks actually play, perhaps things would be a lot better.

]]> By: barry econ http://www.discusseconomics.com/banking/money-creation-where-does-the-money-come-from/comment-page-1/#comment-33457 barry econ Thu, 29 Sep 2011 21:52:18 +0000 http://www.discusseconomics.com/?p=163#comment-33457 The problem (among many) happens when bank cease to be in competition and collude. For example CDOs that contributed to the financial collapse. Many financial institutions were in bed. Doesn't mean nationalizing is the answer, but perhaps well placed regulations. The problem (among many) happens when bank cease to be in competition and collude. For example CDOs that contributed to the financial collapse. Many financial institutions were in bed. Doesn't mean nationalizing is the answer, but perhaps well placed regulations.

]]> By: Jonathan http://www.discusseconomics.com/banking/money-creation-where-does-the-money-come-from/comment-page-1/#comment-33442 Jonathan Wed, 28 Sep 2011 03:34:20 +0000 http://www.discusseconomics.com/?p=163#comment-33442 While intriguing, I think the real problem with the argument that we should just nationalize the role of banks (by having government print and lend the money), is that it's the identical argument for nationalizing everything and having government run the entire economy. Interest by banks is equivalent to markup by stores; it's just their way of taking a profit on what they do. People think that banking is "too easy" a way to make money, and therefore immoral. But if it's so easy, then we should all just invest in bank stocks! However, on that measure, it's not so easy. In arguing that the banks are just parasites that suck all the wealth out of the society, people perhaps forget: 1) that banks are in competition and can't just dictate their interest rate and spread with what they give depositors; 2) the effect of defaults in flowing money out of banks which effectively reduces the sucking effect of the interest they charge; 3) the fact that increased money supply via debt reduces the value of that debt via inflation, so the banks' share of the economy is not necessarily always increasing; 4) governments do print money sometimes, especially during deflation. Those factors may help to account for where money for interest comes from. While intriguing, I think the real problem with the argument that we should just nationalize the role of banks (by having government print and lend the money), is that it's the identical argument for nationalizing everything and having government run the entire economy. Interest by banks is equivalent to markup by stores; it's just their way of taking a profit on what they do. People think that banking is "too easy" a way to make money, and therefore immoral. But if it's so easy, then we should all just invest in bank stocks! However, on that measure, it's not so easy. In arguing that the banks are just parasites that suck all the wealth out of the society, people perhaps forget: 1) that banks are in competition and can't just dictate their interest rate and spread with what they give depositors; 2) the effect of defaults in flowing money out of banks which effectively reduces the sucking effect of the interest they charge; 3) the fact that increased money supply via debt reduces the value of that debt via inflation, so the banks' share of the economy is not necessarily always increasing; 4) governments do print money sometimes, especially during deflation. Those factors may help to account for where money for interest comes from.

]]> By: KoiL http://www.discusseconomics.com/banking/money-creation-where-does-the-money-come-from/comment-page-1/#comment-31594 KoiL Mon, 14 Feb 2011 12:13:05 +0000 http://www.discusseconomics.com/?p=163#comment-31594 Money is printed 'with' interest attached. To me that's making it from nothing. ie: a dollar gets printed @ the reserve rate of say 5%. (I'm an Aussie) So that dollar now costs $1.05 to repay. Repay who btw? Once Joe Average deposits it into his bank account Mr. Bank Robber can now legally loan $9 against every dollar they hold. Again profiting from 'nothing' This means that the 2% the bank pay's you in interest on your $4000 savings account creates a loan value to create bank profits. A pinch for you & truck loads for them. Again from doing nothing. They have loaned $36,000 against your 4k @ 12-15% over 4-5 yrs. Do the math it's shitloads. In the late 90's world wide. Banks and insurance companies no longer needed to hold 35% in cash as security. It came down to under 10%. Look where that got us. It freed up the market to pursue their newly acquired addiction for derivatives. The so called GFC bailed out these bank derivatives yet the insurance side is ballooning 4-5 times greater than that. Which of course will be GFC round 2. If you owe money. Get ready to be a slave for REAL! This shit doesn't just happen. It's planed that way. If I'm wrong at all here please set me straight, but I doubt it. Money is printed 'with' interest attached. To me that's making it from nothing. ie: a dollar gets printed @ the reserve rate of say 5%. (I'm an Aussie) So that dollar now costs $1.05 to repay. Repay who btw? Once Joe Average deposits it into his bank account Mr. Bank Robber can now legally loan $9 against every dollar they hold. Again profiting from 'nothing' This means that the 2% the bank pay's you in interest on your $4000 savings account creates a loan value to create bank profits. A pinch for you & truck loads for them. Again from doing nothing. They have loaned $36,000 against your 4k @ 12-15% over 4-5 yrs. Do the math it's shitloads. In the late 90's world wide. Banks and insurance companies no longer needed to hold 35% in cash as security. It came down to under 10%. Look where that got us. It freed up the market to pursue their newly acquired addiction for derivatives. The so called GFC bailed out these bank derivatives yet the insurance side is ballooning 4-5 times greater than that. Which of course will be GFC round 2. If you owe money. Get ready to be a slave for REAL! This shit doesn't just happen. It's planed that way. If I'm wrong at all here please set me straight, but I doubt it.

]]> By: Jay070 http://www.discusseconomics.com/banking/money-creation-where-does-the-money-come-from/comment-page-1/#comment-31575 Jay070 Wed, 05 Jan 2011 19:15:50 +0000 http://www.discusseconomics.com/?p=163#comment-31575 barry econ - We need to remove the power to create money from bankers. And your fears of inflation are overblown. The money in circulation would be backed by the goods and services of the American people. The problem most people have in discussing economics is that they are conditioned into thinking everything has be borrowed. Bankers and their controlled media and schools have done a good job in hiding the evil and greediness of their debt-as-money system. barry econ - We need to remove the power to create money from bankers.

And your fears of inflation are overblown. The money in circulation would be backed by the goods and services of the American people. The problem most people have in discussing economics is that they are conditioned into thinking everything has be borrowed.

Bankers and their controlled media and schools have done a good job in hiding the evil and greediness of their debt-as-money system.

]]> By: barry econ http://www.discusseconomics.com/banking/money-creation-where-does-the-money-come-from/comment-page-1/#comment-31571 barry econ Mon, 03 Jan 2011 06:10:41 +0000 http://www.discusseconomics.com/?p=163#comment-31571 The government can only 'spend' currency if they have money to 'spend'. They don't 'own' all the money in circulation. So if the govt wants to build they need to first get their hands on cash. One way is through gov't bonds (taking money out of circulation) and then turning around and spending. That's a really simplistic example, but it shows that there are steps before you can 'spend'. The government can only 'spend' currency if they have money to 'spend'. They don't 'own' all the money in circulation. So if the govt wants to build they need to first get their hands on cash. One way is through gov't bonds (taking money out of circulation) and then turning around and spending. That's a really simplistic example, but it shows that there are steps before you can 'spend'.

]]> By: Jay070 http://www.discusseconomics.com/banking/money-creation-where-does-the-money-come-from/comment-page-1/#comment-31565 Jay070 Sat, 01 Jan 2011 22:07:09 +0000 http://www.discusseconomics.com/?p=163#comment-31565 The solution to the money problem is to have the U.S. Government SPEND the currency into circulation through legitimate government projects or services. If that would happen, there would be NO NATIONAL DEBT which exists to make bankers rich. And since debt and usury wouldn't be crushing us, banks wouldn't be needed as such primary sources of "money." Armored cars wouldn't have to round up all the currency from the masses and businesses just to be LOANED AT INTEREST back to the next victim in order for the currency to circulate again. The solution to the money problem is to have the U.S. Government SPEND the currency into circulation through legitimate government projects or services. If that would happen, there would be NO NATIONAL DEBT which exists to make bankers rich.

And since debt and usury wouldn't be crushing us, banks wouldn't be needed as such primary sources of "money." Armored cars wouldn't have to round up all the currency from the masses and businesses just to be LOANED AT INTEREST back to the next victim in order for the currency to circulate again.

]]> By: Law http://www.discusseconomics.com/banking/money-creation-where-does-the-money-come-from/comment-page-1/#comment-29520 Law Fri, 18 Jun 2010 21:14:53 +0000 http://www.discusseconomics.com/?p=163#comment-29520 An interesting place to start reading about all of this is in the history books of how the system started in the first place. I highly recommend reading about John Law. An interesting place to start reading about all of this is in the history books of how the system started in the first place. I highly recommend reading about John Law.

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