why cant we just print some more money?

ZTD

painted_lady wrote: »

Ever heard of the German hyper-inflation?

You don't need to go back to Germany. Zimbabwe right now. Though it has moderated. They've run out of paper.

ZTD

1694 wrote: »

Ever learned to read: "but insist banks increase their fractional reserve deposits in proportion to with the new money untill the the bank ratios are 1 to 1."

New money entering into the system but in a similar time frame it is being soaked up and the money that commercial banks used to create is decreased.

No more inflation than pouring water into a bucket and at the same time putting a hole in the bottom BUT the water starts moving through the system again and the banks can't get us into this position again.

What does "in proportion" mean?

Actually it doesn't matter what it means. Throughout history there have been people who have claimed "there's a shortage of money". It ends in hyperinflation and the repudiation of the currency. Always has done, and always will do. Next you're going to suggest collaterising it on something to try and make it worth more. Church lands maybe...ah no..can't do that, John Law already pulled that stunt.

Look at your banknote - what do you see? You see the words "I promise to pay the bearer on demand the sum of <X> pounds."

Two parties, an amount, a future time and a signature. What is it? It's a credit agreement.

You can't pay off debt with more credit. Yes, there are loads of people who say you can, just like there are loads of people who invent perpetual motion machines, and turn basemetals into gold. You can only pay off with savings. Savings are not bits of paper. Saving is consumption forgone. That means we as a country will produce more than we consume.

Given we have a very stunted manufacturing industry, and that our huge industry in "diversity training" isn't very exportable - it's gonna fall heavily on the "reduction in comsuption" side.

1694

Ok I will start at the begining and explain how we got where we are:
This is how banking works (against you.)
-The bank has £0, you have £100 paper notes
-You deposit £100 in paper cash, you now have a bank statement of £100
-Someone asks for a loan of £100 and gets a £100 credit to their account
-They withdraw your £100 of cash-your bank statement remains at £100
-You can electronically transfer that £100 to anyone else if you want to buy something on debit card for example.
-So you have £100 on your debit card which you can spend, and the other person has £100 in cash to spend...the money is doubled!!! If the money available to spend is doubled but your £100 stays the same (plus a little interest) your buying power halves.
-If you choose not to spend on your debit card but try to withdraw cash, this is a run on the bank and the bank will ask for a tax payer bail out.

Since very few people do ask for cash, banks are permitted by law to do this nine times. The banks of course know form experiance that only 1/9th of demands will be in the form of hard cash so they always make up and lend a digital 9 times the original paper or coin. Every time you deposit £1 in the bank your buying power is reduced by a factor of 9.

Keeping your money in a bank makes you poorer, the only person that gains is the banker.

Deep down you already know this, but have never thought about it before.

(This stems back to a time when, gold bars were real money and gold certificates were the digital money. As long as people were happy with the gold certificates and didn’t want the gold things would be fine.)


Now the real problem! If there was £100 to start with and £900 was lent at interest of 0.2% even if the borrowers took all the money of that originally existed and added it to their loans they will still be short of the total repayments: £900 at 0.2% interest is £1080. Where can that £80 come from? No where, someone has to give up something they owned before they borrowed. The process can take place slower if the interest rate charged is lower than 0.2% but compound interest on debts that will always end the same way.

The £80 didn't exist, it wasn't created, here we are. Stuck.

Given the above, if we print new money BUT legally require banks to increase the paper money they store in there vaults at the same rate as we print it unitl the banks have all a deposit to loan ratio of one 2 one then the current problem is not only solved but cannot occure again.

I never said there was a shortage of money, quite the opposite for too long the banks have created too much.

ZTD

1694 wrote: »

Ok I will start at the begining and explain how we got where we are:

Since very few people do ask for cash, banks are permitted by law to do this nine times. The banks of course know form experiance that only 1/9th of demands will be in the form of hard cash so they always make up and lend a digital 9 times the original paper or coin.

No. They're permitted by law to do it 12.5 times. The reserve ratio is only 8% under the EU "Capital Adequacy" directive, though the regulators would have palpitations if they came close to that.

1694 wrote: »

Every time you deposit £1 in the bank your buying power is reduced by a factor of 9.

Except it isn't.

1694 wrote: »

Given the above, if we print new money BUT legally require banks to increase the paper money they store in there vaults at the same rate as we print it unitl the banks have all a deposit to loan ratio of one 2 one then the current problem is not only solved but cannot occure again.

So lets say the money supply is £100 - and the economy consists of 100 loaves of bread (to keep it simple) and people have £50 in savings. That means they can buy 50 loaves of bread out of their savings.

The Government prints £999,900. That means that each loaf of bread now costs £10,000. People can now buy half of 1 percent of a loaf of bread. But now you're going to tell me that's not inflation.

1694 wrote: »

I never said there was a shortage of money, quite the opposite for too long the banks have created too much.

If there is no shortage of money, then why do you want the government to print more of it?

1694

Print it and remove it, to get it moving again. In at one end out the other. In a similar way sand is stuck in an open ended pipe, shove some more in one end, let it fall out the other. The amount of sand in the pipe is the same.

That printed money, or other printed money already in circulation passes into the bank vaults and must remain there. It cannot be lent by the banks, and the banks can't use it as a there reserve fraction to create new digital money to lend. The banks cannot spend it either until some there outstanding debts are reduced by the same amount. They have an extra papaer £5er in there vault, somoene repays a loan obligatoin of £5, the paper fiver can be spent, ie pay employees. The bank can't however create a new digital lone off that fiver.



You have changed some numbers on the fractional reserve system, but the system doesn't change.

Fractional reserve banking will lead us here every time do you not agree? If not please explain why not.

ZTD

1694 wrote: »

Print it and remove it, to get it moving again. In at one end out the other. In a similar way sand is stuck in an open ended pipe, shove some more in one end, let it fall out the other. The amount of sand in the pipe is the same.

But how do you remove it? Taxation? So it goes from government to bank to government. Wash, rinse, repeat.

Unless youre suggesting stuffing it into the banks, and then tax the holy living crap out of the peasants.

I believe Herbert Hoover tried that one.

1694 wrote: »

That printed money, or other printed money already in circulation passes into the bank vaults and must remain there. It cannot be lent by the banks, and the banks can't use it as a there reserve fraction to create new digital money to lend.

So what use is it? None. You might as well give them pretty shells to fill up their vaults.

1694 wrote: »

You have changed some numbers on the fractional reserve system, but the system doesn't change.

Fractional reserve banking will lead us here every time do you not agree? If not please explain why not.

Not exactly here, but let's face it - if you ignore the small details, one hole looks pretty much like another. And fractional reserve will always end up in a hole.

The simple fact is, debts are *always* repaid. If not by the borrower, then by the lender. And right now the borrowers are bust. So the lenders will have to suffer, and their lenders - etc.

1694

Unless youre suggesting stuffing it into the banks, and then tax the holy living crap out of the peasants.
I believe Herbert Hoover tried that one.
Stuff it in bank vaults and stuff the tax out of banks?

So what use is it? None. You might as well give them pretty shells to fill up their vaults.
Shells were an old form of money, as money just repersents human endavour, time and effort.

Not exactly here, but let's face it - if you ignore the small details, one hole looks pretty much like another. And fractional reserve will always end up in a hole.
This we agree on, which is why making banks hold ratios of 1:<1 might work. When you lend a fiver to a mate, you can't make use of that fiver till you have it back.