An economics, investment, trading and policy blog with a focus on Modern Monetary Theory (MMT). We seek the truth, avoid the mainstream and are virulently anti-neoliberalism.
“Money is work done or the promise to do work, i.e, you can buy a product that someone made (work done), or get someone to do work for you.”
I see money as an accounting system. A dollar, or a pound sterling, is a unit of account. What we count is the perceived value of goods and services. Money is a measure of perceived value, a “store” of perceived value, and a medium of exchange.
Whoever controls this accounting system controls the world. The “golden rule” (whoever has the gold makes the rules) is backwards. In reality, whoever makes the rules gets the gold.
Our rulers control us through fear. They cause us to suffer poverty and enslavement. In order for us to cope with the misery of poverty and enslavement, we build mental boxes (i.e. we create beliefs and delusions) that “explain” and “justify” our suffering. These mental boxes become miserable jail cells. We become so used to our personal jail cell that the thought of freedom scares us. We fear the unknown world outside. And indeed, our rulers claim that if we leave our jail cell, the economy will crash, and the world will be destroyed. Most people believe this lie, because most people rely on it for “protection” from the unknown. They cling to their jail cell. Therefore, when you tell them that monetarily sovereign governments can create infinite money out of thin air (in their own currency) most people think you are insane. When you tell people that there is a world outside their mental jail cell, most people think you are insane.
Yesterday I was reading about people who have “out-of-body experiences.” One person said that this spiritual practice requires focus and commitment. He said there are always unseen “spirit guides” available to help us, but we must mentally ASK for their help. This is just like regular earthly life. Once we seal ourselves into a mental jail cell, no force in the universe can free us. Only we can do it. We can get help if we sincerely and open-heartedly ask for it, but if a person refuses to ask, or to make a sincere attempt, then there is nothing we can do for him. Any attempt to end his suffering will frighten him and make him angry. We see this when we try to explain MMT to newcomers that are sealed in their mental jail cells. They call us insane.
Everything outside our wretched little jail cell is "insane."
“So, do banks create money out of thin air? What they do is get you to sign a contract that you will promise to do the work necessary to pay money back, in other words, the borrower creates the money by doing work, often over many months, or years. So we could say the borrower gives the fiat money value as he works to pay the loan off.”
In a manner of speaking, but bank loan money is still money. If I take a $100,000 mortgage, the bank creates an account that lists my debt, and the bank also credits the account of the home builder or home seller by the amount of the sales price. As I pay back the mortgage, the loan principle is steadily zeroed out (i.e. destroyed). The bank makes its profit on the interest charged.
The system is riddled with so many flaws, and has so much potential for abuse, that it has created the global mess we are in today.
“So you get a loan for $10,000 and the bank credits your account by putting in the number 10,000 and it appears that the money came out of thin air, as libertarians believe.”
I don’t know about libertarians, but all money is indeed created out of thin air, since money only exists in thin air. Money is not physical. Money is an entirely mental construct, just like points on a sports scoreboard. By changing the numbers on scoreboards or bank accounts, we create points out of thin air, and we send points back into thin air.
“So you can see that fiat money is real money.”
Of course it is, because we mentally agree that it is. Points on a scoreboard have no physical existence, yet points are real because we agree they are real. To claim that fiat money is not real money is like claiming that English words are not real words. Or that numbers in mathematics are not real numbers.
4 comments:
.
PART 1 of 2
“Money is work done or the promise to do work, i.e, you can buy a product that someone made (work done), or get someone to do work for you.”
I see money as an accounting system. A dollar, or a pound sterling, is a unit of account. What we count is the perceived value of goods and services. Money is a measure of perceived value, a “store” of perceived value, and a medium of exchange.
Whoever controls this accounting system controls the world. The “golden rule” (whoever has the gold makes the rules) is backwards. In reality, whoever makes the rules gets the gold.
Our rulers control us through fear. They cause us to suffer poverty and enslavement. In order for us to cope with the misery of poverty and enslavement, we build mental boxes (i.e. we create beliefs and delusions) that “explain” and “justify” our suffering. These mental boxes become miserable jail cells. We become so used to our personal jail cell that the thought of freedom scares us. We fear the unknown world outside. And indeed, our rulers claim that if we leave our jail cell, the economy will crash, and the world will be destroyed. Most people believe this lie, because most people rely on it for “protection” from the unknown. They cling to their jail cell. Therefore, when you tell them that monetarily sovereign governments can create infinite money out of thin air (in their own currency) most people think you are insane. When you tell people that there is a world outside their mental jail cell, most people think you are insane.
Yesterday I was reading about people who have “out-of-body experiences.” One person said that this spiritual practice requires focus and commitment. He said there are always unseen “spirit guides” available to help us, but we must mentally ASK for their help. This is just like regular earthly life. Once we seal ourselves into a mental jail cell, no force in the universe can free us. Only we can do it. We can get help if we sincerely and open-heartedly ask for it, but if a person refuses to ask, or to make a sincere attempt, then there is nothing we can do for him. Any attempt to end his suffering will frighten him and make him angry. We see this when we try to explain MMT to newcomers that are sealed in their mental jail cells. They call us insane.
Everything outside our wretched little jail cell is "insane."
“So, do banks create money out of thin air? What they do is get you to sign a contract that you will promise to do the work necessary to pay money back, in other words, the borrower creates the money by doing work, often over many months, or years. So we could say the borrower gives the fiat money value as he works to pay the loan off.”
In a manner of speaking, but bank loan money is still money. If I take a $100,000 mortgage, the bank creates an account that lists my debt, and the bank also credits the account of the home builder or home seller by the amount of the sales price. As I pay back the mortgage, the loan principle is steadily zeroed out (i.e. destroyed). The bank makes its profit on the interest charged.
The system is riddled with so many flaws, and has so much potential for abuse, that it has created the global mess we are in today.
Continued below…
.
PART 2 of 2
“So you get a loan for $10,000 and the bank credits your account by putting in the number 10,000 and it appears that the money came out of thin air, as libertarians believe.”
I don’t know about libertarians, but all money is indeed created out of thin air, since money only exists in thin air. Money is not physical. Money is an entirely mental construct, just like points on a sports scoreboard. By changing the numbers on scoreboards or bank accounts, we create points out of thin air, and we send points back into thin air.
“So you can see that fiat money is real money.”
Of course it is, because we mentally agree that it is. Points on a scoreboard have no physical existence, yet points are real because we agree they are real. To claim that fiat money is not real money is like claiming that English words are not real words. Or that numbers in mathematics are not real numbers.
Our reality is based on agreement and consensus.
Apologies to all.
The above comments were in response to Kaivey's post "Why fiat money is real money."
I don't know how I messed up.
Thanks Konrad.
As Andrew Anderson pointed out, I was really talking about bank credit rather then government money.
Post a Comment