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Aug '24 •
Money out of thin air
Still noodling on how to describe the monetary system in words my Mum could understand. Regarding money creation and the mind bending reality of 'money out of thin air'. The metaphor that is resonating with me is the concept of Immaculate Conception.Folks understand the principle of it and this is very much like how money is created. Unlike anything else it is created with no 'work', with no production cost, with no combination of materials, with no effort whatsoever. I think this is why it is so abhorrent to our common sense. How can anything be produced from nothing? This for me is the root of the misdirection of 'the national debt'. We know that the government does not have to 'work' to find the money to spend (Immaculate Conception of government spending). But if you don't appreciate the reality of this Immaculate Conception, you will continue to ask the question 'but where will we find the money', 'but, we need to borrow to pay for stuff', 'the national debt is unaffordable' etc etc. The reverse of the Immaculate Conception is the destruction on money into nothingness and deletion - this logically is not too difficult if you accept immaculate conception but too difficult to grasp if you don't. There is also the Private version of Immaculate Conception when banks create money for loans and their destruction into the void when the loans are repaid. The story of money creation is so shocking to the 'common sense' that I for one will be describing it in an uncommon way because that is just what it is - a totally uncommon process. No production cost, no need for materials, no need for labour - money from nowhere with no cost or 'for free' as the rest of us might describe it
0 likes • Aug '24
@Nelson Guedes thanks for your thoughts. I agree that cash needs physical stuff to bring it into existance. I love cash and use where I can but it accounts for a tiny percent of 'money'. 95%+ of 'money' is digital tokens which (electrons aside) costs nothing to actually bring into existence. It's this preserve unnatural process that I am trying to describe to the 99% of people with no understanding of this field
0 likes • Sep '24
@Simon Roberts Thanks - I agree there is more to the story particularly in who gets to receive the 'baby'
Aug '24 •
The paradigm of bank accounting - custody
Why did the practice of accounting in banking come to be structured around the automatic pairing of a scalar quantity with a vector one? Why do those accounts, by their own rules, insist upon the simultaneous recording of matching magnitudes of assets and liabilities? I think the answer is custody - that banks look after other people's money. They hold it in safe and sceure custody. They are not permitted, under law and under their licence to be a bank, to spend that money in any way they please. They are custodians of property belonging to others. THat's surely why a vector quantity must be involved, in order to denote the carrying (as from the Latin root of 'vector') of that money into other hands. A scalar quantity must also be involved to denote the value of the money. All is surely well in this world when custody of an externally-derived kind of financial equity is required. Specie and other kinds of commodity have long met that requirement of externality of origin. What happened when, for example, precious metal was discovered? It arose as an asset of its owner, found in Nature. Did its value derive from a liability of the place where it was found or mined to its new owner? Is gold's value due to a financial debt carried by a goldmine? Surely not. It seems that an asset has arisen without a matching liability, and that must be because society has chosen not to apply accounting rules to physical goods derived from Nature. They are considered Nature's gifts, and we have chosen to say that their value is inherent. Their value isn't sourced fron Nature's liability to us. Nor has there been the mining of an equal amount of anti-gold from the goldmine, to keep the net equity of all physical goods equal to zero. Switch focus to modern non-commodity money. In the latter part of the 19th century, writers such as Walter Bagehot pointed out that the amount of money in the world likely significantly exceeded the value of the known quantity of specie. So the world's money has, de facto, been 'off gold' for a long time, using a non-commodity basis - even if that's wasn't widely acknowledged by the authorities.
0 likes • Aug '24
Just noodling on this. Double entry was created precisely to ensure books balanced in profit seeking organisations ie banks. The methods adopted necessarily go along with the concept that negative equity will lead to financial death and the classification and recording processes were invented precisely to keep score on financial health under this assumption that corporate death is possible This accounting framework is inadequate to deal with a body whose ability to maintain negative equity (as measured by these processes) allows the other entities in the economy to carry positive equity You seem to be going in the direction of using the current accounting schema but creating a new class of non-liability/negative asset that doesn't carry the stigma of the traditional 'liability'. I really like this
Aug '24 •
What’s the state of MMT ?
I understand that some Skool members attended the 2024 MMT Conference at Leeds in the UK - feedback from their experience of that event would be interesting to hear, I suggest. I confess to feeling disheartened that the MMT movement doesn’t seem to be making a bigger splash in the media. It’s surely good that some fundamental issues about State fiat money, and ways of explaining and describing its freedom from debt to a third party, have been explored here at Skool. But I’m somewhat surprised that these issues, emerging here at Skool from recent discussions, don’t obviously seem to have already come to light and been popularised by the MMT movement. Can it really be the case that outsiders, such as ourselves at Skool, are trying to expand the boundaries of MMT’s message more energetically than the movement itself is doing? Or is it simply a matter of my flawed perceptions, because the movement has already explored just those same sorts of ideas and insights long ago, but without widespread publicity? For one example, see - https://www.skool.com/debunking-economics-7964/more-from-physics-mea-culpa-bond-behaviour-and-two-suggestions?p=f5a52866 and in particular other related comments by Challenger Skool members Kevin and Chris. Of course I’m just one guy, with inherently limited knowledge, experience and awareness, so I might have blithely missed this particular boat entirely. Has MMT somewhere, somewhen pointed out that conventional accounting practice assumes an unspoken truth so universal that, conventionally and in the past, there was never the least need to mention it explicitly? Are there documents and references to show that the MMT movement has not only mentioned it already, but has engaged in making a mighty song-and-dance about it - since it seems to touch so closely on MMT’s key message about the reality of modern government spending and debt?
0 likes • Aug '24
I'm also interested in the answer to this question having spent a lot of time studying the MMT storyline. Richard Murphy is the most visible proponent of this in the UK but he is at odds with a some of the stories the MMT founders prescribe - he has been critical and received nothing more than alienation from the MMT core set. The truly disheartening 'uninviting' of our own Steve Keen displayed a very concerning dogmatic mindset from the organisers and founders which doesn't auger well for open discourse and mobilising of an assault on the orthodox views we see time and time again in the media
Jul '24 •
Might us money-reformers stop shooting ourselves in the foot ?
This is a personal plea, arising from how I’ve become a bit depressed that MMT might never succeed in displacing conventional beliefs about money. I see a potent force, that’s constantly impeding progress, coming from money reformers themselves. I feel we metaphorically shoot ourselves in the foot, by repeatedly using words like borrowing, debt and deficit. Such words, in the public mind, surely strengthen the very ideas about State money that we are trying to weaken. The public knows full well what the words borrowing and debt entail to them - sums of money, owed to another party, that are due to be repaid in future. The public sees that when an individual or company goes into in financial deficit, they must be carrying debt to someone else. I’m also depressed that the public-relations toxicity of these words doesn’t seem to be strongly appreciated by some money reformers, perhaps because their better knowledge and understanding of what, in the context of fiat money and a sovereign money authority, those words truly mean makes those reformers relatively immune to the toxic effects that the public likely experience. Even Steve, in his ‘Meme that is destroying Western civilisation’, has freely used the word debt when describing fiat money - even though he also talked of debt-free fiat money, later in the same piece. Of course, using that language is tempting simply because its strong conventionality will direct readers’ thoughts expressly towards the concepts intended. Yet it also misdirects those thoughts into accepting the very misunderstandings we want those readers to reject. Surely we should seek and use alternative expressions, other words and phrases, and avoid using ’anti-MMT’ language when talking about MMT-style money reform. For example, a simple change might be to talk about National self-debt, government self-deficit, or even maybe self-borrowing ? Those hybrid words are only slightly more cumbersome, don’t sound wholly unfamiliar and bring the distinct advantage that, among some of the public, they might trigger the thought “What, no-one can be in debt to themselves, so what does self-debt mean then?”.
0 likes • Aug '24
No mainstream commentator other than Richard Murphy is brave enough to stand in the face of ‘received wisdom’ and say there is no problem with the National Debt, we need deficits, the government doesn’t need to borrow, money comes from thin air. The self sustaining lies serve anyone who quotes them. It’s going to take some brave souls to stick their head above the parapet. If the Lib Dems or Greens learned this stuff their might actually be a visible discussion on it
Jul '24 •
Looking forward and backward - at banks and the State
Over a decade ago, I wanted to know why society had stumbled so badly, in a crisis about money that had engulfed so much of the world. Through the activist group Positive Money, I discovered that banks had behaved badly. Rather than being symbiotic to society they’d behaved more like parasites. That was the beginning of a journey to explore and learn in the new-to-me field of economics. I read of J M Keynes’s dream about the “euthanasia of the rentier”, found out what that meant, learnt about how banks had acted parasitically, grabbing income they did little to deserve, and learnt about how that behaviour had been concealed, becoming hard to see. Then I learnt of a second problem, much connected with but not at all the same as the first. That recent governments, all around the world, had chosen to wear straight-jackets. Rather than solve social problems, using resources that were readily available, they had consciously chosen to be unable to act. Faced with social and environmental crises, governments were deliberately deciding not to govern and not to act. It seemed like someone who’s caught a dangerous and possibly fatal disease. They have pills in their pockets that can treat the disease with substantial success, and could even stand a chance of curing it. They refuse to swallow the pills, out of a mistaken, firmly-held conviction that harm will inevitably be the result. Governments, it seems, have deeply-mistaken convictions about money. Politicians and civil servants, who administer and regulate the money system, appear to not understand how it works. Learning about money and economics has led, via a long and far from straight road, to that staggering, shattering, so-hard-to-believe and yet entirely inescapable conclusion. Worse, this second problem isn’t separate from the first but more like the cause of it. It isn’t only ideas that have gone astray, but language too. Then language then becomes a bane not a boon, concealing rather than revealing. In this field, some words don’t mean what they seem to say. Other words confuse or mislead, adding preconceptions, assumptions or side issues that deflect or distort any chance of clear understanding. Jargon abounds. Sometimes that jargon is appropriate and correct, while at other times it’s twisted or incorrect. How to tell the two apart?
0 likes • Jul '24
I love your summary of matters in your first few paragraphs and they reflect up my frustrations perfectly. The voluntary straitjacket is the perfect metaphor. Governments have happily strapped themselves in, believing the persuasive whispering of the neo-classical worm tongues that govern the IMF, World Bank, Central Banks, universities, professional accountants etc With respect to debt and credit. The issue for me is single-entry thinking. Debt can take many forms and if GDP growth is your thing, this can't happen without new debt. You can't spend more than you did last year unless you circulate the same amount of digital tokens (I prefer this term to 'money') faster than last year (research shows this doesn't happen) or you need new digital tokens. So more debt is an essential facilitator of higher spending. Until it grows so big it kills us all. Richard Vague is revelatory on this in his book. Debt is a facilitator of growth but there is a tipping point at which it is the means to crash the economy. It sows the seeds of growth and the seeds of collapse. So whilst I agree that debt is a loaded term (and should be disaggregated into it's different functional forms and rebranded heavily), debt should be talked about in the same breathe as the credit side. Stephanie Kelton's 'the government's red ink is our black ink' is the exemplar. Similarly our private mortgage debt is the gateway to owning own houses. We acquire an asset (the house) that we could not afford without the lender agreeing to the arrangement, by way of promising to pay via instalments (our private debt). Similarly with corporate debt (unless you are borrowing someone's else's money to pay to your Monaco based wife - I'm looking at you Philip Green) if the company is borrowing to expand rather than financialise, then the debt is the facilitator of this positive activity. Someone once described the balance sheet as a way of showing you what a company owns (assets) and how it got to own them (liabilities/creditors/shareholder funds). Seen that way the 'credit' side of the balance sheet is not, prima facie, an albatross loaded with guilt/share and moral indignation. The credit side is of the balance sheet explains how the asset side got to be there and to detail the ongoing responsibilities you have to those who contracted with you to get you there.
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@howard-langer-6054
Spurs, martial arts and retail. Got to be a better way of running economies than this
Active 152d ago
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