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Ok then, If it ain't MMT ....

Critter7r

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then where DOES the currency come from?

Please don't say customer deposits at banks.

Other than that, I'm willing to have a dialogue about where people really think our currency originates.
 

OrphanSlug

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:popcorn2:

(I love how quickly these conversations devolve)
 

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Well, you see, when a mommy bill loves a daddy bill very much, they both go into the pocket of a lobbyist and the lobbyist goes down to some steak bar where she works out a deal with someone who knows someone whose friend's uncle was neighbors with an incumbent legislator who won't be elected in this political climate. After the lobbyist wipes with the mommy and daddy bill and washes up, she returns to her shiny, used 2016 Chevy Equinox and drives back home to her wife and kids.

Then the garbage man takes the mommy and daddy bill to a landfill where they wait for legislation on carbon emissions, nuclear decommissioning and recycling to be passed. Meanwhile, several other bills have been put into the pockets of the people running on fossil fuel, nuclear and wasteful operations thanks to the lobbying magic.

And that's how baby bills are made.

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ludin

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If people actually knew what they were talking about it wouldn't be an issue.
 

JohnfrmClevelan

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then where DOES the currency come from?

Please don't say customer deposits at banks.

Other than that, I'm willing to have a dialogue about where people really think our currency originates.

We know that governments can create money. That should not be arguable.

We also know that banks do something, even though we can't seem to agree on exactly what.

Here are the three main theories of banking:

1. Credit creation theory. This is the one I have been pushing in debates here. Banks create money out of thin air by expanding their balance sheets and "crediting" people with accounts.

2. The Fractional Reserve theory. Where "individual banks cannot create credit or money, but collectively the banking system does so, as a new reserve is “split into small fragments, becomes dispersed among the banks of the system. Through the process of dispersion, it comes to constitute the basis of a manifold loan expansion."

3. The Financial Intermediation theory. Where banks lend out savings, basically.

Source

I find that theories 2 and 3 to have fatal flaws - namely, they cannot account for the actual amount of money in the system without banks creating money out of thin air, which is the very basis of the credit creation theory. But feel free to make the case for your favorite school of thought.
 

ludin

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We use a fractional Reserve system of banking.

why? because banks are required to carry a reserve of cash at all times.
so if I get a 100k loan from the bank and deposit it in another bank they can loan out 90k of it if the reserve is set to 10%.
if people C gets the 90k and deposits it then the bank can lend out 81k.

our banking system is pretty simple if you understand it.
 

JohnfrmClevelan

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We use a fractional Reserve system of banking.

why? because banks are required to carry a reserve of cash at all times.

That is only a legal requirement. It doesn't explain where money comes from. It is also a misleading way of describing the system we have, as reserves are not the safety net that you make them out to be. Reserves are there for settlement purposes.

so if I get a 100k loan from the bank and deposit it in another bank they can loan out 90k of it if the reserve is set to 10%.
if people C gets the 90k and deposits it then the bank can lend out 81k.

What, exactly, are you depositing? And what, exactly, are those banks loaning out? Hard currency?

Reserves and cash are MB. Bank deposits are M1/M2.

our banking system is pretty simple if you understand it.

But you still can't tell me where new money comes from.
 

ludin

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That is only a legal requirement. It doesn't explain where money comes from. It is also a misleading way of describing the system we have, as reserves are not the safety net that you make them out to be. Reserves are there for settlement purposes.

why can you not actually discuss what I said? ol yes because you can't be honest in a discussion.
the fact is we use a fractional based money system. I never said anything about safety nets at all. so there is your strawman argument.
I said banks are required to carry a reserve of case at all times.

What, exactly, are you depositing? And what, exactly, are those banks loaning out? Hard currency?
Banks don't loan out hard currency I never said they did. you are not being honest again and making stuff up.
although I guess if you got a loan from the bank and requested hard currency you could do that as well.

after the loan goes through and the money is in your account you can do whatever you want with it. that includes withdrawals.
of course banks just don't give loans for no reason.
the loan is a just a transaction from the bank to you.

Do Banks Create Money from Thin Air? - New Economic PerspectivesNew Economic Perspectives

I think this sums it up nicely.

But you still can't tell me where new money comes from.

please see the reserve banking system it is in there. which is what we use.
 

Critter7r

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We use a fractional Reserve system of banking.

why? because banks are required to carry a reserve of cash at all times.
so if I get a 100k loan from the bank and deposit it in another bank they can loan out 90k of it if the reserve is set to 10%.
if people C gets the 90k and deposits it then the bank can lend out 81k.

our banking system is pretty simple if you understand it.
Ok, so you get your $100k loan from Bank A and deposit it in Bank B .... and then you say that Bank B is now able to make $90k in loans, presumably to other people. But you don't take out a loan just to hold it in a bank. You are not going to leave $90k of a $100k loan sitting in Bank B, you're going to spend it on whatever it was you took out a loan to buy. Yet Bank B is lending out your $90k, even as you're spending it. So either your money is in (at least) two places at once, or currency is created from nothing for you to use.

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JohnfrmClevelan

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why can you not actually discuss what I said? ol yes because you can't be honest in a discussion.
the fact is we use a fractional based money system. I never said anything about safety nets at all. so there is your strawman argument.
I said banks are required to carry a reserve of case at all times.

And what do you think they have this reserve of cash for? What is its purpose?


Banks don't loan out hard currency I never said they did. you are not being honest again and making stuff up.
although I guess if you got a loan from the bank and requested hard currency you could do that as well.

Right - banks don't loan out hard currency. So what does that leave? Credit. Bank-created money. But, but, but... you claimed that banks loaned out other people's savings. So, which is it?

Do Banks Create Money from Thin Air? - New Economic PerspectivesNew Economic Perspectives

I think this sums it up nicely.

please see the reserve banking system it is in there. which is what we use.

No, Dan doesn't say anything about the reserve banking system in his paper. Did you even bother to read your own link?

Also - were you aware that New Economic Perspectives is an MMT website? And Dan Kervick is an MMTer? You said that his paper sums it up nicely, and I agree. Does that mean you are on board with MMT now?
 

ludin

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Ok, so you get your $100k loan from Bank A and deposit it in Bank B .... and then you say that Bank B is now able to make $90k in loans, presumably to other people. But you don't take out a loan just to hold it in a bank. You are not going to leave $90k of a $100k loan sitting in Bank B, you're going to spend it on whatever it was you took out a loan to buy. Yet Bank B is lending out your $90k, even as you're spending it. So either your money is in (at least) two places at once, or currency is created from nothing for you to use.

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please see the article I posted on this it explains everything in detail.
 

ludin

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And what do you think they have this reserve of cash for? What is its purpose?

So that it can meet day to day transactions that people want to do. So when I go to the bank and say hey I need 1000 dollars
they have it in the bank to give me 1000 dollars. if a business person goes into the bank and goes I need 10k
they have 10k to give the person. that is what the reserve is for.

how do you not know this stuff but claim to be some expert?


Right - banks don't loan out hard currency. So what does that leave? Credit. Bank-created money. But, but, but... you claimed that banks loaned out other people's savings. So, which is it?

Technically they do. they are able to loan out up to the reserve rate of their deposits etc. so I you deposit 1k they can loan out 90%.
that doesn't always mean they give people cash. did you not read the article I gave you?

probably not.

No, Dan doesn't say anything about the reserve banking system in his paper. Did you even bother to read your own link?

wow you really are just that obtuse aren't you?

Also - were you aware that New Economic Perspectives is an MMT website? And Dan Kervick is an MMTer? You said that his paper sums it up nicely, and I agree. Does that mean you are on board with MMT now?

nope because that paper has nothing to do with MMT. your dishonesty in a discussion just continues.
in fact he directly imply's that your argument of money out of thin air is wrong.

but you didn't read the paper so you don't know or you do what you always do
and only read some of it instead of all of it.
 

DA60

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Consumer deposits at banks.

Plus fractional reserve banking...among other sources.


And I won't debate this as I don't much care about it...I am just a tad bored right now.
 

JohnfrmClevelan

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nope because that paper has nothing to do with MMT. your dishonesty in a discussion just continues.
in fact he directly imply's that your argument of money out of thin air is wrong.

but you didn't read the paper so you don't know or you do what you always do
and only read some of it instead of all of it.

:lamo

No, I read (and understood) the whole paper. It's an MMT paper by an MMTer, and you were too foolish to understand that you were trying to use an MMT paper to undermine an MMT argument. But that's what happens when you just post the first Google result that comes up without checking it out.

We are less than 15 posts in to this thread, and you have already painted yourself into a corner.

I read these papers because 1) I'm interested in the subject, and 2) I have to, in order to check out your false claims of what they contain. This paper did not talk about the fractional reserve system, as you falsely claimed it did, just like the paper you cited in the other thread did not contain the false quote you attributed to it. So if anybody is debating dishonestly here, Ludin, it's you. You are making stuff up, then making the compounding mistake of attributing your made-up garbage to a real paper.
 

ludin

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:lamo

No, I read (and understood) the whole paper. It's an MMT paper by an MMTer, and you were too foolish to understand that you were trying to use an MMT paper to undermine an MMT argument. But that's what happens when you just post the first Google result that comes up without checking it out.

Wrong it is a paper by a person that doesn't discuss MMT at all but says that banks really don't create money out of thin air.
I guess you missed that but that does not surprise me.

We are less than 15 posts in to this thread, and you have already painted yourself into a corner.

Yes you have because so far none of your argument have anything to do with what I posted or the article that
said banks really don't create money out of thin air. not sure what you are going to do about it.
probably continue to be dishonest since you really don't have anything else.

I read these papers because 1) I'm interested in the subject, and 2) I have to, in order to check out your false claims of what they contain. This paper did not talk about the fractional reserve system, as you falsely claimed it did, just like the paper you cited in the other thread did not contain the false quote you attributed to it. So if anybody is debating dishonestly here, Ludin, it's you. You are making stuff up, then making the compounding mistake of attributing your made-up garbage to a real paper.

if you read them then you clearly don't understand what they are saying or you are just that dishonest that you distort what they say.

Nope the paper was in direct contention to your claim that banks create money out of thin air. the paper disagree's. I tend to go with the paper.
so there is yet another dishonest argument from you.

The other fact is that we do run a fractional banking system.
 

JohnfrmClevelan

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Wrong it is a paper by a person that doesn't discuss MMT at all but says that banks really don't create money out of thin air.
I guess you missed that but that does not surprise me.

"Where did the IOU come from? Was it created from thin air? More or less."


Yes you have because so far none of your argument have anything to do with what I posted or the article that
said banks really don't create money out of thin air. not sure what you are going to do about it.
probably continue to be dishonest since you really don't have anything else.

What am I going to do about it? I am going to continue making you look foolish with your own sources, that's what.

Nope the paper was in direct contention to your claim that banks create money out of thin air. the paper disagree's. I tend to go with the paper.
so there is yet another dishonest argument from you.

The point of the paper is that, despite what some people think, banks cannot just whip up a bunch of profits out of thin air. i.e., they are not "self-funding," like the U.S. government is. But banks do create loans out of thin air, and these loan proceeds constitute the vast majority of M1/M2. It is most of the money we all use in day-to-day transactions.

The other fact is that we do run a fractional banking system.

Yeah.... not so much.
 

ludin

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"Where did the IOU come from? Was it created from thin air? More or less."

as I said you only read what you want to read. there is more to the article but you don't post that because you are dishonest.


What am I going to do about it? I am going to continue making you look foolish with your own sources, that's what.

so you still don't have an argument. thanks I can now ignore anything you say.

The point of the paper is that, despite what some people think, banks cannot just whip up a bunch of profits out of thin air. i.e., they are not "self-funding," like the U.S. government is. But banks do create loans out of thin air, and these loan proceeds constitute the vast majority of M1/M2. It is most of the money we all use in day-to-day transactions.

While there is truth in this metaphorical claim, the metaphor can also be seriously misleading, and leads some to attribute powers to commercial banks that are actually retained by the government alone under our system.

No, banks are not self-funding, either individually or in the aggregate. The “out of thin air” language, while containing elements of truth, can be extremely misleading, and people using this language sometimes woefully under-represent the significance of central bank liabilities and the government in the US financial system.

The article specifically addresses people like you amazing how you didn't read that.

And these bank debts are not just so-called debts or pro forma debts. They are real debts which banks must and do routinely pay off in the course of doing everyday business; and the assets a bank uses to pay these debts come from sources external to the bank. A bank cannot simply manufacture its own payment assets from thin air.

People who are fond of saying the banks create money “from thin air” often seem to suggest that banks are no different than the government in that regard, and can thus obtain valuable monetary assets simply by manufacturing them ex nihilo, in effect profiting from pure seigniorage in the way a currency-issuing government can. But this picture is wildly inadequate.

But it is crucial to recognize that banks do not and cannot simply manufacture their own assets – whether from thin air or otherwise. What they manufacture are liabilities; that is, debts. And they obtain assets from external sources, mainly by trading debts for debts.

Yeah.... not so much.

Fractional Reserve Banking Definition | Investopedia

again proven wrong.
you should probably do more research and less arguing with people.
as much as you shout at other people your claims simply are just
non-existent.
 

JohnfrmClevelan

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as I said you only read what you want to read. there is more to the article but you don't post that because you are dishonest.

I didn't post more because I didn't need to post more to refute your point.

While there is truth in this metaphorical claim, the metaphor can also be seriously misleading, and leads some to attribute powers to commercial banks that are actually retained by the government alone under our system.

No, banks are not self-funding, either individually or in the aggregate. The “out of thin air” language, while containing elements of truth, can be extremely misleading, and people using this language sometimes woefully under-represent the significance of central bank liabilities and the government in the US financial system.

The article specifically addresses people like you amazing how you didn't read that.

And these bank debts are not just so-called debts or pro forma debts. They are real debts which banks must and do routinely pay off in the course of doing everyday business; and the assets a bank uses to pay these debts come from sources external to the bank. A bank cannot simply manufacture its own payment assets from thin air.

People who are fond of saying the banks create money “from thin air” often seem to suggest that banks are no different than the government in that regard, and can thus obtain valuable monetary assets simply by manufacturing them ex nihilo, in effect profiting from pure seigniorage in the way a currency-issuing government can. But this picture is wildly inadequate.

But it is crucial to recognize that banks do not and cannot simply manufacture their own assets – whether from thin air or otherwise. What they manufacture are liabilities; that is, debts. And they obtain assets from external sources, mainly by trading debts for debts.

Put your quotes in quotes, or a quote box, otherwise it looks a whole lot like plagiarism. Five of the above six paragraphs are lifted right from Dan's article.

And this stuff that you just posted, that you think refutes what I have been saying? I just said the same exact think in my previous post. You are completely clueless.




Ah, Investopedia - the Picture Dictionary of economics.

I explained in the other thread why the fractional reserve theory is a poor representation of how our banking system actually works. Banks do not loan out of deposits; they create 100% of the loan out of thin air, then adjust their reserve balance (and their capital balance) after the fact. Loans are not dependent on any pre-existing funds or capital.
 

austrianecon

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That is only a legal requirement. It doesn't explain where money comes from. It is also a misleading way of describing the system we have, as reserves are not the safety net that you make them out to be. Reserves are there for settlement purposes.

Read up on Basel agreements. That's another legal requirement.

Reserves and cash are MB. Bank deposits are M1/M2.

Uh, no. MB is Federal Reserve cash and assets (bonds). M1/M2/M3 are commercial bank money (stuff we spend).
 

austrianecon

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Ok, so you get your $100k loan from Bank A and deposit it in Bank B .... and then you say that Bank B is now able to make $90k in loans, presumably to other people. But you don't take out a loan just to hold it in a bank. You are not going to leave $90k of a $100k loan sitting in Bank B, you're going to spend it on whatever it was you took out a loan to buy. Yet Bank B is lending out your $90k, even as you're spending it. So either your money is in (at least) two places at once, or currency is created from nothing for you to use.

No, you have zero clue on what you are talking about.. Imapeg explained it very well.

The MB is the base money which is created by the FED when it buys assets. There is a reason why there is $16t in banks but only $3.8t in MB.
 

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No, you have zero clue on what you are talking about.. Imapeg explained it very well.

The MB is the base money which is created by the FED when it buys assets. There is a reason why there is $16t in banks but only $3.8t in MB.

You said that imagep was on target when he said, ""Broad money" is simply the same MB circulating by the process of lending and the deposits of that lending, with no increase in MB. It's the same money being counted over and over again, without the offseting liabilities created by the lending being subtracted out." Then, in your very next sentence, you make a distinction between the $3.8 trillion in MB and the $16 trillion in broad money. Make up your mind.
 

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MB is cash and reserves, not bonds.

No, MB is Central Bank creation of money. So when Fed buys bonds (Government), it's creating money. That's why it's call QE.

Maybe you need to actually read up on stuff that isn't a MMT echo chamber.
 

austrianecon

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You said that imagep was on target when he said, ""Broad money" is simply the same MB circulating by the process of lending and the deposits of that lending, with no increase in MB. It's the same money being counted over and over again, without the offseting liabilities created by the lending being subtracted out." Then, in your very next sentence, you make a distinction between the $3.8 trillion in MB and the $16 trillion in broad money. Make up your mind.

It is being counted over and over again. The $3.8t is the Fed creation. The rest (which I didn't say was broad money) is actually accounted for in Asset vs Liability in the Private banking. Meaning if you borrow $100k from Bank A and it goes to Bank B (sale of a home), Bank B has $90k in asset (which is loanable), and so on and so forth as you go down the banking line.

But for an MMTer this is complex and they assume money was just printed because it's too difficult to understand.
 
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Critter7r

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Ok, so you get your $100k loan from Bank A and deposit it in Bank B .... and then you say that Bank B is now able to make $90k in loans, presumably to other people. But you don't take out a loan just to hold it in a bank. You are not going to leave $90k of a $100k loan sitting in Bank B, you're going to spend it on whatever it was you took out a loan to buy. Yet Bank B is lending out your $90k, even as you're spending it. So either your money is in (at least) two places at once, or currency is created from nothing for you to use.

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No, you have zero clue on what you are talking about.. Imapeg explained it very well.

The MB is the base money which is created by the FED when it buys assets. There is a reason why there is $16t in banks but only $3.8t in MB.

So the money is in more than one person's "pocket" at a time. Thanks for clearing that up for me. But thanks for telling me I have no clue, while linking to a post that says the same thing in different terms.

"The M2+ metrics aren't true measures of our money supply, they are measures of how much money could theoretically be accessed, if it was possible for them to be accessed simultaneously (which it is not)."
 
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