Money

Money, whence it comes.

When the Central Bank prints off more bank notes and the supply of money exceeds the supply of goods and services, ie there is a mismatch, they are not in balance, we have inflation.

Inflation is a hidden tax, the pound in your pocket is worth less than it was.

When Gordon Brown claimed the economy was safe in his hands, this lie was exposed by looking at the depreciation of pound sterling. When the pound sterling fell against the Micky Mouse euro with all its woes and internal contradictions, then it was fairly obvious that something was very wrong. The pound almost reached parity with the euro, it has since picked up and is hovering around one pound equals 1.20 euros.

I am famously reminded of Harold Wilson after the UK had to go to the IMF with a begging bowl claiming the pound in your pocket was still worth the same. But I digress.

It is not only Central Banks that create money, so do Commercial Banks, they do so every time they make a loan.

You borrow a thousand pounds from the bank. You buy a car and pay cash. The man of whom you have bought the car deposits the money in the bank. The bank then loans out this money several times over.

You pay your loan back to the bank. You not only pay back the loan, you also pay interest. Where has the interest come from?

It is not only the Central Banks and Commercial Banks who create money. We do every time we buy goods and services with our credit cards. Prior to our using our credit card, the money did not exist. We hand over our credit card, and hey presto, we have created some money out of thin air.

Easy credit, easy money, creates debt!

I have somewhat oversimplified, I have ignored the velocity of money, ie how fast it circulates within the economy.

We need local currencies. Local currencies help to isolate us and put our money to better use, creating jobs in the local economy.

If we spend money in a High Street shop, that money (apart from an infinitesimal amount) goes straight out of the local economy. If we spend it in a local shop, a significant percentage of our spend, is then spent in the local economy. If it is a local currency it can only be spent in the local economy.

It used to be a capital offence to debace the currency.

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2 Responses to “Money”

  1. Bhima Says:

    There is a book out on the internet called “The Lost Science of Money.” I suggest you read it.

    The equation you describe is off a little bit. The issue is a bit more ridiculous than you describe. Not only, do banks make money by lending “person a” money in the form of interest, they are allowed to use the existence of that loan to as the 10% surety required to loan a further 10x more than the size of “person a’s” loan. Thus, on the books they will have not only the first loan + the same money deposited by the recipient of that money.. they will have used both to create more money.

    The question of “where does money come from?” is one very few people bother to ask.. I do not believe that moving to a system of a greater monetisation of our economy, by diversifying currencies into local environments is the way forward. There is an issue of parity, which will always become an issue in a world governed by monetary considerations.

    The capitalistic system, at its very core is reliant on exploitation, of resources – both human and natural – as well as exploitation of opportunity to leverage an advantage against a competitor, even your best friend. The ideology of our capitalistic system is derived from a profoundly twisted notion of Darwinian evolution and the concept f “survival of the fittest.”

    By distribution of the economy into localised currencies the problem is just off-set from a national problem to a regional one.. The Greater London Area will have a profoundly greater economic advantage over Guilford, just on difference of population, and thus labour force to be exploited. I would propose a two pronged approach to alleviating economic instability. Firstly, change the taxation system to support worker owned businesses, such that any company with 10 employees or more will have a greater tax burden if there is less than 50% employee ownership, raising to 99% over 1,000 employees. Secondly, make all businesses which are services to the population at large, not for profit (this will include, all telecoms, high-street banks, utilities, public transport, air ports, and anything else that might be suitable). All investment banks must not be allowed to profit from any form of futures speculation, in the commodities market, specifically food.

    The above steps will create a system of, a) greater democratic accountability within the economic infrastructure, b) remove profiteering from essential services and should improve the general delivery of service, c) remove accelerated inflation caused by the commodities and derivatives markets.

    We are told we live in a democracy.. if so, can someone please tell me why all politicians from all parties are trying to appease the markets.. the money men??

    Humanity’s single greatest step forward in our evolution, will come when we collectively surrender the need for money.

  2. KingofthePaupers Says:

    Keithpp:”When the Central Bank prints off more bank notes and the supply of money exceeds the supply of goods and services, ie there is a mismatch, they are not in balance, we have inflation.”
    Jct: Yes, Economics teaches that more money chasing the goods is Shift A inflation aggravated by issuing more money. But there also exists a Shift B inflation, the same money chasing less goods after foreclosure solved by issuing more money. Economics doesn’t teach Shift B inflation, the banking systems engineer does. Youtube for “Shift B inflation.”

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