Where has all the money in the world gone? • Hacker News Board

Re: Where has all the money in the world gone?

#21

Post by gaius » Sat, Jun 23, 2012, 7:42 AM UTC

killerpopiller wrote: post #19

bokonist wrote: post #2

The fundamental problem is that the monetary systems of the modern world are all designed on the Wile E. Coyote principle. As long as you never look down, the system works. In the U.S. there is ~$14 trillion in government debt. There exists tens of trillion more in private debt. But only $2 trillion exists in bonafide, actual, real honest-to-goodness dollars (I'm including in that count accounts at the federal reserv…

imho you forgot to mention the key difference between US and Europe. The US can print money because there is still demand in buying $. This demand is an artificial one caused by the petro-$, the binding of every oil purchase to $. So everybody involved in oil trading has to purchase $ to purchase oil! Iraq and Iran threatend to sell oil in €, for several reasons, they couldn't and didn't deliver, unfortunatly. The BR…

Iraq only couldn't because they got invaded! There is a strong case that this was the real reason for Gulf War II.

Re: Where has all the money in the world gone?

#22

Post by harryh » Sat, Jun 23, 2012, 7:46 AM UTC

killerpopiller wrote: post #19

bokonist wrote: post #2

The fundamental problem is that the monetary systems of the modern world are all designed on the Wile E. Coyote principle. As long as you never look down, the system works. In the U.S. there is ~$14 trillion in government debt. There exists tens of trillion more in private debt. But only $2 trillion exists in bonafide, actual, real honest-to-goodness dollars (I'm including in that count accounts at the federal reserv…

imho you forgot to mention the key difference between US and Europe. The US can print money because there is still demand in buying $. This demand is an artificial one caused by the petro-$, the binding of every oil purchase to $. So everybody involved in oil trading has to purchase $ to purchase oil! Iraq and Iran threatend to sell oil in €, for several reasons, they couldn't and didn't deliver, unfortunatly. The BR…

You are wrong.

http://www.pkarchive.org/economy/NothingforMoney.html

Re: Where has all the money in the world gone?

#23

Post by InclinedPlane » Sat, Jun 23, 2012, 7:47 AM UTC

bokonist wrote: post #2

The fundamental problem is that the monetary systems of the modern world are all designed on the Wile E. Coyote principle. As long as you never look down, the system works. In the U.S. there is ~$14 trillion in government debt. There exists tens of trillion more in private debt. But only $2 trillion exists in bonafide, actual, real honest-to-goodness dollars (I'm including in that count accounts at the federal reserv…

Money is objectively valueless and only subjectively has value depending on circumstance. Inflating away debt or printing your way out of debt are not actually methods of repayment. If creditors thought that the US would just print more money to pay off its debts then they would ask for much, much higher interest rates or just not lend money. Printing your way out of debt is a sure fire way to end up in a hyper-inflationary spiral. Indeed, the fact that people trust that the US, for example, won't try to do that is why the US has a reasonable credit rating.

Re: Where has all the money in the world gone?

#24

Post by InclinedPlane » Sat, Jun 23, 2012, 7:52 AM UTC

wavephorm wrote: post #4

When you learn how money really works, you begin to understand just how diabolical our entire socio-economic system is. Inflation, recessions, boom-bust, the stock market, fractional reserve banking, interest rates... it's all rigged, a giant shell game, and it boils down to an invisible whip that the rich use to keep people working for things they don't really need and to pay taxes for the sole purpose of perpetuati…

It goes beyond that. Think about how very tenuous ordinary civilization is. Think about what would happen if you suddenly turned into a psychopath. How easy it would be to kill so many people around you. Jam a pen in someone's neck and they're dead. How easy would it be for the guy standing behind you in line to take your life? And that applies to everyone around you all the time. Every second of every day we are putting our lives in the hands of our fellow citizens. Once you come to grips with this you start to appreciate the little things and you recognize the importance, seriousness, and value of just being a decent human being to others.

Re: Where has all the money in the world gone?

#25

Post by calibraxis » Sat, Jun 23, 2012, 7:53 AM UTC

sirclueless wrote: post #14

wavephorm wrote: post #4

When you learn how money really works, you begin to understand just how diabolical our entire socio-economic system is. Inflation, recessions, boom-bust, the stock market, fractional reserve banking, interest rates... it's all rigged, a giant shell game, and it boils down to an invisible whip that the rich use to keep people working for things they don't really need and to pay taxes for the sole purpose of perpetuati…

I don't know about you, but I have had down periods in my life, when I wasn't actually producing anything of value. If we actually used a barter economy then I would starve, or be reduced to sweating in a field growing plants. But since we live in a world where money is transferrable and credit is obtainable, I can weather those periods just fine and live in a decent house with air conditioning in the summer and heat…

It actually turns out that barter is one of the founding myths of modern economics. Notice that economics books always have these invented stories of quaint towns (or savage tribes) of people in the same community bartering; they don't actually offer historical evidence. Turns out there is none. When people trade in a community, credit systems predate currencies, which predates barter. This is the opposite of the usual myth (where everyone barters like fools, then they use currency, then they tech up to credit).

And they also make the strange assumption they'd be engaging in the "spot trade," which also is ahistorical. It's not like you'd come to me with shoes and I'd hand over a sack of potatoes. If we're neighbors, our relationship wouldn't be about market transactions (unless I suppose we're hostile and untrusting, so we'd better trade simultaneously so we don't rip each other off).

I think Graeber's _Debt: The First 5,000 Years_ is the most illuminating source on the subject. (http://www.amazon.com/Debt-The-First-000-Years/dp/1933633867)

Re: Where has all the money in the world gone?

#26

Post by jfoster » Sat, Jun 23, 2012, 7:57 AM UTC

The money-go-round slowed down a bit.

Re: Where has all the money in the world gone?

#27

Post by guynamedloren » Sat, Jun 23, 2012, 7:57 AM UTC

Very interesting explanation, but unless I missed something, the concluding statement is simply incorrect, which makes the whole thing wrong.

> So now you're still growing apples, but instead of trading them for deer-haunches and shoes, you trade them for Loddars. So far, so good. Once again, you want some meat, except harvest time hasn't come yet so you don't have any Loddars to buy meat with. You call me up (cellphones have been invented in this newly-efficient economy), "Hey otherwiseyep, any chance you could kill me a deer and I'll give you ten Loddars for it at harvest-time?" I say, "Jeez, I'd love to, but I really need all the cash I can get for every deer right now: my kid is out-growing shoes like crazy. Tell you what: if you can write me a promise to pay twelve Loddars in October, I can give that to the shoe-maker." You groan about the "interest rate" but agree.

Did a lightbulb just go off? You and I have once again created Money. Twelve loddars now exist in the town economy that have not been printed by the central bank. Counting all the money trading hands in the village, there are now (a) all the loddars that have ever been printed, plus (b) twelve more that you have promised to produce.

"Loddars" are essentially dollars, a physical form of currency. The apple farmer does not have any loddars, but he promises to give twelve loddars to the hunter at harvest-time. The loddars come from people purchasing his apples, which have already been printed, thus are already in the system. Since loddars have been standardized by the central bank by this point, an apple farmer cannot simply 'create loddars' out of thin air. He can promise loddars, but that's very different than actually creating loddars. New money has not entered the economy.

Re: Where has all the money in the world gone?

#28

Post by CamperBob2 » Sat, Jun 23, 2012, 7:58 AM UTC

killerpopiller wrote: post #19

bokonist wrote: post #2

The fundamental problem is that the monetary systems of the modern world are all designed on the Wile E. Coyote principle. As long as you never look down, the system works. In the U.S. there is ~$14 trillion in government debt. There exists tens of trillion more in private debt. But only $2 trillion exists in bonafide, actual, real honest-to-goodness dollars (I'm including in that count accounts at the federal reserv…

imho you forgot to mention the key difference between US and Europe. The US can print money because there is still demand in buying $. This demand is an artificial one caused by the petro-$, the binding of every oil purchase to $. So everybody involved in oil trading has to purchase $ to purchase oil! Iraq and Iran threatend to sell oil in €, for several reasons, they couldn't and didn't deliver, unfortunatly. The BR…

So everybody involved in oil trading has to purchase $ to purchase oil!

I don't really understand why this is considered so important. Big deal, so oil is priced in dollars. Say I have some Euros and want to buy €100 worth of oil. I trade the €100 for $X, buy $X worth of oil 100 microseconds later, and now I have the €100 worth of oil I wanted. What difference did it make to me if $X was $0.01 or $10,000? I'm trying to buy oil, not currency.

Re: Where has all the money in the world gone?

#29

Post by mtgx » Sat, Jun 23, 2012, 8:05 AM UTC

bokonist wrote: post #2

The fundamental problem is that the monetary systems of the modern world are all designed on the Wile E. Coyote principle. As long as you never look down, the system works. In the U.S. there is ~$14 trillion in government debt. There exists tens of trillion more in private debt. But only $2 trillion exists in bonafide, actual, real honest-to-goodness dollars (I'm including in that count accounts at the federal reserv…

But what happens if US has to print a lot of money all of the sudden? Won't they just wipe out a lot of value from most people's incomes, while also creating higher prices for products?

Re: Where has all the money in the world gone?

#30

Post by gaius » Sat, Jun 23, 2012, 8:14 AM UTC

bgilroy26 wrote: post #8

bokonist wrote: post #2

The fundamental problem is that the monetary systems of the modern world are all designed on the Wile E. Coyote principle. As long as you never look down, the system works. In the U.S. there is ~$14 trillion in government debt. There exists tens of trillion more in private debt. But only $2 trillion exists in bonafide, actual, real honest-to-goodness dollars (I'm including in that count accounts at the federal reserv…

I thought US debt was backed by the military? The debt represents faith in the United States and the world-system as a whole. I think the only way this could collapse Wile E. Coyote style was if the trade routes in the Atlantic and the Pacific developed a huge problem with highwaymen and the US military couldn't lock it down.

Well yes and no. The way you establish a currency is as follows, traditionally: you assume political control over some area of land, and all political power is backed ultimately by military power (tho' cushioned by laws, courts, police, etc internally). Then you declare that everyone living on this land must pay taxes, and they must pay these taxes in... Seashells, or gold doubloons, or tons of flax, or whatever. Hey presto, you have a currency! Later on for convenience sake you can keep all your seashells in a vault and use paper tokens instead.

The thing is tho', you want other countries to accept seashells too, places where you have no political or military control. The way this happens is that those seashells can be exchanged for goods and services provided by your citizens, who need seashells anyway to pay their taxes, so might as well use them for everything else too. Therefore the value of a seashell on the currency market (i.e. outside your borders) is backed by the industrial power of your country.

So to sum up, a military backs a currency only in the sense that the military holds borders in which industry can operate safely - and not in the sense of military as ultimate debt collectors. At least, the Greeks better hope not.