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Where has all the money in the world gone?

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

#101

Post by edwardy20 »

ExpiredLink wrote: post #55
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…

Exchange rates Euro to USD: 10 years ago: 1 EUR = 0,95 USD today: 1 EUR = 1,3 USD As European I really like the 'Euro crisis'. I'd be pleased to get more of it. PS: What media has written about the financial crises since 2008 is mostly nonsense. In fact, we have seen a deep media crisis. Media is not able any more to give a remotely adequate picture of reality (not limited to financial aspects of course).

Considering the 10.3% unemployment rate in the EU right now, I doubt your fellow Europeans share the same viewpoint.

(http://epp.eurostat.ec.europa.eu/statistics_explained/index....)

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

#103

Post by jvm »

dimitar wrote: post #33

The question is wrong - the assumption is that the quantity of money has decreased, while purchases ("Aggregate demand") are the same. If fact its exactly the other way around. Anyone who misses this fact is very unlikely to give a correct explanation. And the explanation is in an Econ 101 course.

I agree with you technically speaking, but another way of thinking about it is that cashflow is really what we think of when we think "quantity of money" (Adam Smith, a gold piece that sits in a chest is realy not part of the money supply, yaddayadda). Cashflow (aka NGDP) is actually way down: http://marketmonetarist.com/2012/06/19/guest-post-measuring-...

...it looks like this is the distinction you're making when you say Aggregate demand, I'm really just adding this comment to help other people better understand your comment.

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

#104

Post by Tycho »

tubbo wrote: post #85

"E.g., a new farmer with no track-record might have to promise me twice as many potatoes in exchange for a deer haunch, due to the risk that I might never see any potatoes at all." This part of our system doesn't make any sense to me. What makes you think someone's gonna have more incentive to "pay up" if they now have to work twice as hard?

It's set by supply and demand, not by logical inference. Low risk investments are more in demand, driving their price up and thus lessening their return. High risk investments are in less demand, so their price falls, making the return higher.

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

#105

Post by [deleted] »

judofyr wrote: post #56
InclinedPlane wrote: post #51

Earlier quoted context omitted.

You missed something. Look more closely. The deer hunter gives his dollars to the apple farmer. But he then BUYS SHOES WITH AN IOU FROM THE APPLE FARMER. And the shoe maker can then trade that promissory note to others if he desires as well. The point is that the promissory note is no different in function or substance than money. Money isn't a thing, it's just a universally recognized form of transferable debt.

And now the history repeats itself: - In the same way that apple- and potato-certificates could have different values, how do you know which IOUs you can trust? - Someone says: "Hey, instead of giving IOUs to each other, come to me. I'll figure out if the person is actually able to pay it back later and give him money." Instead of having the IOU accepted by everyone in the village (a seller won't accept an IOU unless…

[deleted]

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

#106

Post by rbn »

judofyr wrote: post #56
InclinedPlane wrote: post #51

Earlier quoted context omitted.

You missed something. Look more closely. The deer hunter gives his dollars to the apple farmer. But he then BUYS SHOES WITH AN IOU FROM THE APPLE FARMER. And the shoe maker can then trade that promissory note to others if he desires as well. The point is that the promissory note is no different in function or substance than money. Money isn't a thing, it's just a universally recognized form of transferable debt.

And now the history repeats itself: - In the same way that apple- and potato-certificates could have different values, how do you know which IOUs you can trust? - Someone says: "Hey, instead of giving IOUs to each other, come to me. I'll figure out if the person is actually able to pay it back later and give him money." Instead of having the IOU accepted by everyone in the village (a seller won't accept an IOU unless…

The Hunter should check the farmer's credit score

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

#107

Post by lsc »

bergie wrote: post #96
cstross wrote: post #61

Earlier quoted context omitted.

So that's why Europe is stuck. It adopted a monetary system that works when the government controls the currency, and adopted it in a situation where governments cannot print money. Minor nit: I believe they adopted the current monetary system in anticipation of future political union . Which was not unreasonable, extrapolating from the Franco-German steel and coal pact forward to the subsequent treaty system that cr…

Exactly, the original point of EU was to disincentivize France and Germany from going into yet another war on resources. Lots of other good (but sometimes confusing) structure has since been built on that foundation, but to me that original point is already enough for keeping the Union around. Disclaimer: some of my current open source work is supported financially by the EU

For context, I'm an American; I've read a bit of history, and I have a very American perspective on the last two world wars; Like most people my age, both of my grandfathers fought in world war two, and like most people, I place more emotional weight on stories told me by family members than accounts written by people on the other side, so my view of European politics is biased in a certain direction, and I don't have a lot of experience with Europe; I re-read this and what I write does sound a little bit racist to my eye; I hope that my question is taken more in the spirit of an ignorant person asking a question about another culture, rather than as a racist remark.

From here, it looks like Germany is now slowly getting, through economic means, what they were prevented from getting through military means during the last two world wars. I mean, sure, this is a hell of a lot nicer than fighting a war of that magnitude; I'm very thankful that I've never been in a situation where another human was seriously trying to kill me (and I've never been in a situation where I needed to kill another human, which, from what I hear, can often be more stressful and mentally damaging than being in a situation where someone else is trying to kill you, assuming you survive.) but... it just seems weird to me that the European community would let Germany reunite, then that they would almost voluntarily place them at the head of the European government.

How do Europeans feel about this? I mean, is my view of "give me the courts and the money supply, let the rabble have the rest" just not shared by most Europeans?

Is there a fear in Europe that Germany is taking over? I certainly haven't seen any of that in media coverage; but I would guess there would be some reluctance to express such feelings out of fear of appearing nationalistic or racist. (Of course, I'm aware that Europe is big; I imagine people in France and Italy, for example, have rather different feelings towards German dominance.)

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

#108

Post by ap22213 »

planetguy wrote: post #81
ap22213 wrote: post #78

I just finished David Graeber's "Debt", and it really enlightened me on this subject more than anything in that reddit thread. It's one of the most scholarly, informative, provocative books I've read in a very long time. I'm actually reading it a second time through, just to make sure I understand it all.

I've been reading large chunks of that and it's both good and bad. The good parts are where he sticks to his core strength of anthropology -- it's filled with fascinating descriptions of how commerce and law worked in various societies, ancient and modern, from the Irish monks who sat down and figured out the precise compensation that you need to pay if one of your bee stings another man [the regular price of the sti…

After I read it, I was so intrigued by his bold analysis, that I had to go read up on opposing views. I figured that there would be tons of economists in outrage on the Internet. And, from my point of view, I really like to understand differing views before I believe I can make a judgement. (Also why I'm reading it again)

However, surprisingly, I couldn't find any good opposing analysis to his book. Maybe because it's too newly published. But, the ones that I did find, seemed to appeal to authority: That Graeber wasn't an economist and was only an anthropologist meant that he didn't really get it. I didn't find those arguments particularly useful. If you can lead me to other materials, I'd be happy to read them. I'm still trying to make sense of it, myself.

Anyway, I can see why you took away what you did. Graeber frequently attacks the establishment and makes some analogies that are somewhat painful to my market-conditioned, western brain. But, my takeaways were still very different.

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

#109

Post by Androsynth »

One of the best explanations about all of this is in the book How an Economy Grows and Why it Doesn't by Irwin Schiff http://freedom-school.com/money/how-an-economy-grows.pdf

It seems this explanation is somewhat of a rehash of that book. The book is relatively short and well worth your time if you found this reddit answer interesting.

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

#110

Post by nhaehnle »

InclinedPlane wrote: post #23
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-infla…

Printing money != inflation - at least given a modern understanding of inflation, where inflation is defined as a change in the price level.

What is it that causes prices to change? Ultimately, prices in the real economy are changed by producers and vendors based on signals that they receive. The only signals that really matter in that regard are (a) cost of supply and labor, and (b) demand for their product.

So now we have all these trillions of US$ in as-good-as-money floating around, but they are essentially stationary wealth deposits, which is why we are not seeing inflation. What if this changes? This is where I believe most people become confused.

If the owners of those as-good-as-money treasuries suddenly decided that they'd rather own paper money as opposed to treasuries, then the US treasury would have to print the required paper money without there being any inflation at all. Instead of non-moving treasuries there would now be non-moving paper bills - there is no difference (except that treasuries pay a little bit of interest).

So clearly it cannot be the printing of paper that causes inflation.

However, if those people then decide to go on a spending spree, then it is quite possible that the additional demand drives prices up in the real economy. So it is the huge reservoir of wealth that, if it were suddenly released, could cause inflation.

If that's what you're worried about, then you have to think about ways to get rid of that wealth. Taxing the rich, perhaps?

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