The mysterious case of the vanishing money

DervProf

julieq wrote: »

It increases net government debt and therefore pays interest to investors, often not UK based, removing it from the UK.

What do I win?

The argument.

geneer

HAMISH_MCTAVISH wrote: »

Immensely curious as to where the bears think money spent on housing benefits, house prices, mortgage interest, rent, etc, actually goes...

We've had several weeks of comments that "money spent on house prices/rents/benefits" is "taken/removed from the economy".

So where exactly do you think it goes?

Could anyone describe the mechanism where they think lending higher amounts of money to buy housing actually decreases the money in circulation within the economy?

Or for that matter, the mechanism through which they think allocating tax revenue to pay for goods and services through housing benefit actually removes money from the economic system?

And if not, lets put this tiresome and fallacious bear meme to bed once and for all.

I don't know Hamish. You might want to clean your own house first.

Can't say theres any shortage of tiresome and fallacious bull memes in regular use.

Particularly since the hits of 2008 are making a comeback.

dazeruk

How do you win at this game?

Post a comment Hamish agrees with and then he shouts SNAP!!!!

geneer

HAMISH_MCTAVISH wrote: »

Immensely curious as to where the bears think money spent on housing benefits, house prices, mortgage interest, rent, etc, actually goes...

We've had several weeks of comments that "money spent on house prices/rents/benefits" is "taken/removed from the economy".

So where exactly do you think it goes?

Could anyone describe the mechanism where they think lending higher amounts of money to buy housing actually decreases the money in circulation within the economy?

Or for that matter, the mechanism through which they think allocating tax revenue to pay for goods and services through housing benefit actually removes money from the economic system?

And if not, lets put this tiresome and fallacious bear meme to bed once and for all.

Sorry, what bear meme? A couple of comments by a couple of posters.


Anyhow, as I see it pouring ever greater chunks of money into interest payments rather than the wider economy is great for banks. But no one else.

Feeding the fractional reserve banking system creates "paper" money. Bubbles are created and inflation expands.

kabayiri

julieq wrote: »

It increases net government debt and therefore pays interest to investors, often not UK based, removing it from the UK.

What do I win?

A teddy bear.

Everyone knows that a 'bear' is highly prized

the_flying_pig

Moronic OP, needlessly picking up on, perhaps, a couple of stray comments that i don't particularly recall reading on here.

In [very] brief:

1: housing benefits - let's get away from silly ideas about money "vanishing" - the problem here is that government [without raising tax revenues] has a finite pool of money to spend. higher HB means, other things being equal, one or more of: (a) an overall reduction in the quality of other public services; (b) more government debt [perhaps leading to more interest payments overseas, but that's a side issue]; or (c) more tax. no more or less than this.

2. house prices [e.g. let's stick to your example of loose lending pushing up house prices] - it brings consumption forward, more consumption today at the expense of less consumption tomorrow. that is all.

Generali

Mallotum_X wrote: »

A hot date with Hamish:beer:

2nd prize 2 dates with Hamish....


.....I'll get me coat.

HAMISH_MCTAVISH

geneer wrote: »

Anyhow, as I see it pouring ever greater chunks of money into interest payments rather than the wider economy is great for banks. But no one else.

I see.

And where do you think "banks" borrow most of their money from these days?

The magic money fairy? Or perhaps from savers.....

So interest payments benefit savers. And of course the bank makes a margin.

Oh, and while we're on the subject, where do you think that bank margin goes? I don't suppose the vast majority of it ends up in salaries for employees (who then spend it in the "wider economy"), purchase of goods and services (from the "wider economy"), dividends to shareholders (such as our pension funds who fund our retirement spending in the "wider economy"), tax contributions (gosh, d'you think that might contribute to housing benefit payments??), etc....

Because if that were the case, you really wouldn't have a leg to stand on.:cool:

Feeding the fractional reserve banking system creates "paper" money.

Ah, I see. So more lending actually creates more money....

Rather than taking money out of the economy.....

Good to know.;)

ninky_2

you could say all benefit money goes back into the economy. i'd argue that jsa probably does more circulating than housing benefit on average because the recipients have less wealth and are less in a position to wealth horde than landlords (on average).

surely the argument of public money being spent to invigorate the economy is the case for pretty much ALL public spending. it's the very thing brown was saying when he fought the election. you don't cut public spending in a recession / economic downturn unless you want to go deeper into recession.

housing benefit cuts are just one way that the private sector are going to take a big hit from these cuts. there are layers upon layers of examples of private sector benefitting from public spending. unfortunately rather a lot of right wing thinkers here seem to entrenched to see that and are allowing years of bitterness and envy towards final salary pension receivers etc to cloud their judgment.

Thrugelmir

HAMISH_MCTAVISH wrote: »

dividends to shareholders (such as our pension funds who fund our retirement spending in the "wider economy"),

Up to the "crash" this was the case. You are also overlooking the billions of lost capital that was lost with collapse of the banks.