Money Money Money Money............................ Money

chewmylegoff

Generali wrote: »

That is similar to what I understand. Are you an accountant by any chance or is there an accountant on here that can confirm?

Re the capital repayment you are right.

Interest income is booked against the period in which it is earned by the bank, not on the inception of the loan. So you don't book all of the interest income on a 25 yr mortgage in the year that you lend the money.

homelessskilledworker

ess0two wrote: »

You and Brit will still be trotting out the same line in 10yrs.

Oh ok...

Who is Brit??

Thrugelmir

mpmbm wrote: »

Only a question of when now, not if anymore,

So far the situation has been managed well. Whether its enough is another matter. That I agree.

purch

Its very simple up till 1971 all currencies in the world were backed by monetary precious metals

Rubbish.

Even the USD was NOT backed by Gold during Bretton Woods.

It was convertible to Gold at a fixed rate, that is all.

Bretton Woods was unsustainable as a monetary system years before the "Nixon Shock", as there was far more currency than Gold since the early 1960's.

I have explained Bretton Woods and the various stages of the destruction of money on this forum numerous times.

I can't be bothered to do so again.

Please try and keep up.

MonkeyMad

I mentioned on another thread that this quoted line of currency being back by gold pre-1971 was cobblers and that for the man in the street it meant nothing, even back when UK was ON the Gold Standard since you couldn't just walk into a bank and get 2 shillings worth of gold, you needed much larger, fixed amounts. Most punters would never have seen the gold backing the currency (I doubt gold sovereigns were seen much in the grocers or the pub).

Generali

MonkeyMad wrote: »

I mentioned on another thread that this quoted line of currency being back by gold pre-1971 was cobblers and that for the man in the street it meant nothing, even back when UK was ON the Gold Standard since you couldn't just walk into a bank and get 2 shillings worth of gold, you needed much larger, fixed amounts. Most punters would never have seen the gold backing the currency (I doubt gold sovereigns were seen much in the grocers or the pub).

AIUI, during the pre-WW1 period you could exchange any note for gold at your local branch of the Bank of England at a fixed price. This worked as for each pound in circulation there had to be a pounds-worth of gold in the BoE's vaults.

After WW1 things got a bit more complicated as you weren't allowed to hold substantial amounts of gold privately except for export or for industrial use (LINK): any amount of gold worth more than £10,000 could be compulsorily purchased by the BoE. The reason for this was to prevent a run on the BoE as the UK didn't have enough gold to back every pound. This was due to the expansion of the money supply during WW1.

MacMickster

Loughton_Monkey wrote: »

I've tried to follow your assertions, and glean a pearl of wisdom, but I remain baffled.

The bit I have most trouble with is the line "..and the velocity of money can create wealth....."

.........

There are 100 people in a village. They all have £100 in the bank. They sit at home all day and do their own thing. All of a sudden, they get bored. So Alan offers to clean Bill's car for £5. Bill mow's Colin's lawn for £5. Colin gives Debbie a golf lesson for £5. Debbie cut's Eric's hair for £5.........

You get the picture. Tell me where a single penny of wealth has been created. From nothing, we now have an 'economy' of £500 a week, £25,000 a year, but absolutely no-one is any richer.

Great description of an economy based on providing services. No wealth is actually created, unless those services are provided to customers outside of that economy.

Unfortunately, if people in such an economy confuse the circulation of money with wealth creation they begin to act in a way which proves destructive.

They spend money outside of this service economy (imports of consumables, holidays abroad etc). In addition, due to the feeling of wealth they begin to pay more for assets which already exist (works of art, property etc).

The feel good factor means that they then also borrow money (which is created through FRB) so that they can benefit from some of tomorrow's new wealth today, repeating the spending patterns described above, not realising that they are effectively participating in a Ponzi scheme.

Meanwhile, other manufacturing economies (eg the BRICS) grow creating real wealth, funded largely by exports to the service economies.

All the time that people within the service economy were feeling wealthier and wealthier, they were actually getting poorer and poorer, transferring some of their previous wealth to the new emerging economies. Having become accustomed to an unrealistic standard of living they then struggle to accept and adjust to their new reality.

MonkeyMad

Generali wrote: »

AIUI, during the pre-WW1 period you could exchange any note for gold at your local branch of the Bank of England at a fixed price. This worked as for each pound in circulation there had to be a pounds-worth of gold in the BoE's vaults.

After WW1 things got a bit more complicated as you weren't allowed to hold substantial amounts of gold privately except for export or for industrial use (LINK): any amount of gold worth more than £10,000 could be compulsorily purchased by the BoE. The reason for this was to prevent a run on the BoE as the UK didn't have enough gold to back every pound. This was due to the expansion of the money supply during WW1.

Both our points are true. All notes could be exchange for gold pre-WW1 (bit later actually) but most people wouldn't have had the notes to exchange so it's a moot point. Post WW1 the amounts exchangeable were larger. I'm making the point that most people probably wouldn't even have understood what the Gold Standard was and it's effect on the since they would never see gold currency.

Generali

MonkeyMad wrote: »

Both our points are true. All notes could be exchange for gold pre-WW1 (bit later actually) but most people wouldn't have had the notes to exchange so it's a moot point. Post WW1 the amounts exchangeable were larger. I'm making the point that most people probably wouldn't even have understood what the Gold Standard was and it's effect on the since they would never see gold currency.

I was trying to add to what you were saying rather than disagree, my apologies for not getting that across!

HAMISH_MCTAVISH

So back to the money supply....