Archive for the ‘Paper money’ Category

MoneyWeek always does a good job in joining together different strands of the reality surrounding debt and putting it all into perspective.

This piece is another example of such work, I found the following points worth noting;

• The effect cheap debt has on corporate behaviour, which in turn translates into market moves/signals

• Statistics in the shape of national debt being measured against GDP which is not entirely genuine due to the whole economy not being ‘owned’ by government . However this leads me to ponder that although government debt is initated by the State, it is all tax paying citizens that will ultimately bear its burden, hence comparing it to GDP does equate to it being the nations debt, but of course not all GDP belongs to all citizens

• How much debt is responsible for living standards. This is particularly worth contemplating, many look at material wealth and standards of living as a barometer for social advancement however if this is heavily influenced by credit and in some cases unaffordable credit, is it simply an illusion? Another house of cards, which others are vying endlessly to win a share of?

https://www.capitalandconflict.com/uncategorised/debt-solves-everything-hopefully/

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For anyone not familiar with the work of Ann Pettifor – one of the few to correctly call the coming of the financial crisis a number of years prior to it arriving, and one of the main proponents of the Jubilee 2000 campaign which cancelled a portion of third world debt – please search for her various articles, lectures and opinions online.

Associated with Keynesian economics and the Labour party, her views may be dismissed by some, however upon closer inspection, I was interested in her view on the creation of money, and what this meant for resolving the debt and economic problems facing the developing world.

She is principally part of the PRIME think tank/research group, which has a number of papers on its site proving an alternative voice on economic issues

The above lecture at the LSE discusses her latest book, ‘The Production of Money: How to Break the Power of Bankers’, and gives an insight into her theories.

What I wish to highlight, are the following;

  • The issue of commodity money, and how scarce resources should not be used as a basis of any monetary system
  • The recognition that a fiat monetary system, can and should be used for the benefit of the population – outside the control of private banks, but in the knowledge that an entirely man-made system should be used to achieve a level of prosperity in all societies
  • There are certainly many socialist aspects to these beliefs, such as exerting capital controls and spending money into existence in terms of health, education and social expenditure thus increasing national debt, however interest ideally should not be necessary when such a system is implemented
  • There are some similarities with what Positive Money are advocating, but it seems there are specific differences, as this discussion points out…

 

 

https://www.khanacademy.org/economics-finance-domain/macroeconomics/monetary-system-topic/fractional-reserve-banking-tut/v/overview-of-fractional-reserve-banking

This praiseworthy organisation is known for providing free, all accessible learning for everyone on a range of core topics.

It does a sterling job of condensing hard to understand subjects, into bite size, digestible knowledge

Few areas have escaped its coverage, and I was fascinated to discover a number of sessions on Banking and Money.

The attached video is one of a three part series explaining how money is created by the private banks, something most people still know little about. This touches many key areas such explaining what Money is, how it actually works and raising valid questions about alternatives.

It doesn’t stop there, you can search for further tutorials on more how banks work, and again how they create money, as well as other technical aspects of the money supply, to name one example.

Its always good to see those of understanding laying bare these facts in a plain manner demonstrating just how easy it is to lift the veil which seems to cover these elements of a modern economy.

One argument which is used to discredit any realistic attempt to return to a gold standard in todays environment of ever expanding money supply, is that currently there is too much money in the system and too little gold to be able to adequately replace one for the other.

Well, Jim Rickards has one answer for us to consider…..

It is true that at today’s price of about $1,300 an ounce, if you had to scale down the money supply to equal the physical gold times 1,300 that would be a great reduction of the money supply.

That would indeed lead to deflation. But to avoid that, all we have to do is increase the gold price. In other words, take the amount of existing gold, place it at, say, $10,000 dollars an ounce, and there’s plenty of gold to support the money supply.

The limiting factor here is not the commodity….but the price itself.

Basic supply and demand economics and its impact on price…..don’t let so-called experts make simple concepts seem impossible. We can’t change the quantity, so change the price! Guess that means the market does not give us a correct price signal in view of this?

I’ve done that calculation, and it’s fairly simple. It’s not complicated mathematics

A Fascinating and extremely pertinent view expressed by MoneyWeek in the following article

A question which has certainly been raised in discussions about the nature and indeed, the durability, of this cryptocurrency, one must decide whether this trend will fall victim to many of the faults of other fiat currencies or does it take of the allure of precious commodities which can potentially outlast humanity itself?

On the surface I cannot think of Bitcoin as anything other than pseudo-fiat, however we may never even know the authority behind it, even if it is everyone of those that use it – can we not fall victim to the same whims of the State? Any man made invention will have its deep flaws and cannot be assumed to be beyond manipulation.

However, I understand the commodity like nature of it too, but as Buffet once remarked about gold, you certainly cannot eat bitcoin, you can’t even touch it, so how much of a commodity can we really think of it as?

..if someone were to hack the algorithm behind a bitcoin, that might have the same effect as a central bank printing money: it could lead to a loss of faith and value. Now there’s an irony! Central bankers are to fiat currencies what hackers are to cryptocurrencies!

My research will continue….

Imaging rights? Monetising the right to use your likeness…even when you are dead….they say money never sleeps, well it doesn’t much die either

Muhammed Ali sold his rights while he was alive….but now he has passed, it will continue to be used. Much like the rights of Elvis Presley which have financially benefitted his estate long after his death.

The ability to recreate an actors image from CGI…most recently seen by the reimaging of Peter Cushing’s Star Wars character is also not a new thing, but something which is becoming increasingly believable and sophisticated, and therefore a potential market exists which can only become more lucrative for the living celebrities who have distinctly popular images.

This allows people to ‘trade’ on their own image, in life and increasingly, in death. Creating revenue streams beyond your physical presence, or even your own labour, in this life.

In an earlier blog, I mentioned how money defies the some of the basic laws of the created realm, notably the way it is created…out of nothing

It seems it can cheat death now too

 

Consider the following from MoneyWeek’s Bill Bonner;

…there is a financial institution of uncertain integrity, with an electronic balance sheet of uncertain accuracy, listing alleged financial claims and contracts of uncertain quality – and that you are one of the many thousands of entries on the debit side, with a claim to a certain number of dollars, which the institution may or may not have… each of uncertain value.

…Today, banks no longer have “money”. They have credits and debits. Your deposit is your bank’s liability and your asset. But look at the balance sheet. You don’t know how many of the claims on the left are right… or whether, when the other creditors get finished with it, any of the assets shown on the right are left.

….and to think some people have an issue with me believing in an unseen God !?