Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Banks create money, but it's less impressive than it sounds

attejuvonen.fi

Post reply on HN
Print view View original

211–220 of 235 posts

Re: Banks create money, but it's less impressive than it sounds

#211

Post by MrXOR »

Excellent article.

Yesterday, I read about the role of banks, I found two quotes:

“Banking was conceived in iniquity and was born in sin. The Bankers own the earth. Take it away from them, but leave them the power to create deposits, and with the flick of the pen they will create enough deposits to buy it back again. However, take it away from them, and all the great fortunes like mine will disappear and they ought to disappear, for this would be a happier and better world to live in. But, if you wish to remain the slaves of Bankers and pay the cost of your own slavery, let them continue to create deposits.” [1]

“Give me control of a nation's money and I care not who makes the laws.” [2]

[1] http://libertytree.ca/quotes/Josiah.Stamp.Quote.69BB [2] http://libertytree.ca/quotes/Mayer.Amschel.Rothschild.Quote....

Re: Banks create money, but it's less impressive than it sounds

#212

Post by jonplackett »

zoul wrote: post #183
jonplackett wrote: post #131

I’d recommend ‘Money As Debt’ if you’re interested in this subject. It’s done as a cartoon but makes it really easy to understand why the world works like this and what the big problems are with it. Namely that if money is created only when you lend it to people, but they have to pay back what you created + interest, there is never enough money to pay all debts back. So bankruptcy is built into the system. It’s like…

Does it? Can’t we just expand the amount of money available forever?

Well, the credit crunch would suggest not.

But, probably more importantly, that relies on an ever increasing economy, which relies on ever increasing use of natural resources, which = earth is screwed.

Re: Banks create money, but it's less impressive than it sounds

#214

Post by clownworld »

jacobush wrote: post #158
TheBobinator wrote: post #132

Earlier quoted context omitted.

Loaning money drives inflation; when a loan check is created, it spends just like cash, except the banks, behind the scene's, trade the loan checks so everyone has enough cash on hand to appear solvent. Inflation drives interest rates; interest consists of the rate of inflation plus risk and margin, no bank is going to make a loan at less the rate of inflation. This self-regultes the rate of loans; the first people t…

What empirical evidence is supposed to sway me in favour of genocide?

https://www.un.org/en/development/desa/population/publicatio...

Re: Banks create money, but it's less impressive than it sounds

#215

Post by raducu »

aronpye wrote: post #112

The article doesn’t adequately cover the role of central banks in fractional reserve banking. Back in the days of the gold standard you used to be able to redeem a set weight of physical gold from the central bank for a dollar / pound of paper cash or minted coin. This conversion ratio was set by the central bank and acted as a final brake on inflation. When the gold standard was abolished and the dollar and pound be…

Two things:

1) Politicians around the world are circumventing central banks with special laws, guaranteed loans programs.

2) Central banks can just "temporarily" buy treasury bills with fictional money -- the only thing keeping us from Weimar inflation is the fact the money hasn't trickled down enough, the population is on the decline, and most of the money goes into propping up asset prices.

Re: Banks create money, but it's less impressive than it sounds

#216

Post by gridlockd »

baobabKoodaa wrote: post #210
gridlockd wrote: post #203

Earlier quoted context omitted.

> That's not what "empirical evidence" means. Empirical evidence is something we observe in the world. If we set a definition "all murder is illegal" and then we conclude "legal murders do not exist", do we have "empirical evidence" that legal murders can not exist? Of course not. Hmm, you're right... > We can conclude the claim is true by definition. ...which means we don't even need any empirical evidence to say th…

> ...which means we don't even need any empirical evidence to say that banks are different and unique from non-bank entities! That's correct, and I said so in the article. I said that (although there is no empirical evidence) the underlying claim is true on a technicality. >> Werner claimed to have empirical evidence for this. > No, he doesn't. He claims that he has empirical evidence for banks creating money out of…

Again, this is an uncharitable misreading of one sentence of the paper.

This is a more reasonable reading:

Banks are different because they create money out of thin air. That has been generally accepted so far, but where is the empirical evidence for banks creating money out of thin air? It's in the paper. That's the contribution of the paper, to show empirically how new money is created.

We don't need evidence (empirical or otherwise) for non-banks not creating money, because that would be proving a negative.

If you want to attack the strong interpretation of the claim, you would have to show how non-banks do create money, which you didn't, because as we already agreed, deposits at non-bank institutions are not considered money.

I implore you to apply the principle of charity (steelmanning) instead of wasting your time on semantic disputes.

Re: Banks create money, but it's less impressive than it sounds

#217

Post by baobabKoodaa »

gridlockd wrote: post #216
baobabKoodaa wrote: post #210

Earlier quoted context omitted.

> ...which means we don't even need any empirical evidence to say that banks are different and unique from non-bank entities! That's correct, and I said so in the article. I said that (although there is no empirical evidence) the underlying claim is true on a technicality. >> Werner claimed to have empirical evidence for this. > No, he doesn't. He claims that he has empirical evidence for banks creating money out of…

Again, this is an uncharitable misreading of one sentence of the paper. This is a more reasonable reading: Banks are different because they create money out of thin air. That has been generally accepted so far, but where is the empirical evidence for banks creating money out of thin air? It's in the paper. That's the contribution of the paper, to show empirically how new money is created. We don't need evidence (empi…

Hmmh, I can see how you might take a more charitable interpretation of that claim, and maybe this does fall in the category of semantic disputes.

> we already agreed, deposits at non-bank institutions are not considered money.

...due to a technicality / accounting conventions. Yes, I conceeded that already in the original revision of the article. Nonetheless, I made a pretty good case why the IOUs created by Full Tilt Poker could be considered money, even though they were created by a non bank institution. Yes, the IOUs created by banks are "more like money", but in my view, the difference is not that large.

Re: Banks create money, but it's less impressive than it sounds

#218

Post by thescriptkiddie »

aronpye wrote: post #112

The article doesn’t adequately cover the role of central banks in fractional reserve banking. Back in the days of the gold standard you used to be able to redeem a set weight of physical gold from the central bank for a dollar / pound of paper cash or minted coin. This conversion ratio was set by the central bank and acted as a final brake on inflation. When the gold standard was abolished and the dollar and pound be…

Gold itself only became worth something because the government says it is. Or rather, it became worth far more once governments started demanding that taxes be paid in gold. Before that it probably wasn't worth all that much, because despite its rarity it wasn't useful for much in the ancient world. Gold isn't some magic substance with intrinsic value.

See Debt: The First 5,000 Years by David Graeber.

Re: Banks create money, but it's less impressive than it sounds

#219

Post by vagab0nd »

aronpye wrote: post #112

The article doesn’t adequately cover the role of central banks in fractional reserve banking. Back in the days of the gold standard you used to be able to redeem a set weight of physical gold from the central bank for a dollar / pound of paper cash or minted coin. This conversion ratio was set by the central bank and acted as a final brake on inflation. When the gold standard was abolished and the dollar and pound be…

Question: Why isn't a one dollar bank note worth more than one dollar in my bank account, since the bank note can be used to pay back the central bank?

Re: Banks create money, but it's less impressive than it sounds

#220

Post by rags2riches »

vagab0nd wrote: post #219
aronpye wrote: post #112

The article doesn’t adequately cover the role of central banks in fractional reserve banking. Back in the days of the gold standard you used to be able to redeem a set weight of physical gold from the central bank for a dollar / pound of paper cash or minted coin. This conversion ratio was set by the central bank and acted as a final brake on inflation. When the gold standard was abolished and the dollar and pound be…

Question: Why isn't a one dollar bank note worth more than one dollar in my bank account, since the bank note can be used to pay back the central bank?

Because the dollar in your bank account is an obligation of the bank to pay you a one dollar bank note or another bank a central bank electronic reserve dollar.
Post reply on HN