> *** Depends on what is the definition of liquidity? Whe discussing money > definitions are paramount. > Point (1) > All "money" is borrowed into existance from chartered banks and is > therefore "credit money" Excepting a negligable (3% in most OECD countries) > amount that is in the form of Gov. legal tender currency and coin and is > used mostly by "poor" people whio have no credibility and are therefore > denied the use of credit money. > > Point (2) > Anyone who has what they think is money converatable into cash is deluding > themselves.
I'm not sure of what this hang-up about money is. In the modern economy, money takes a variety of forms. The stuff you carry in your wallet or pocket is one form. Loans that you can access with your visa card or by writing a check is another. I know that experts (which I'm not) make distinctions between various types of money (M1, M2, M3?) but money is money is money as long as people and business firms agree to accept it as payment for goods and services. > > HARRY :What do they do "with their money"? Put it under the mattress, > where it still loses value, but without any interest to offset the loss? > > ***There is hardly any to put under the matress see above (3% of the total > money supply) I must admit putting a bank loan under a mattrass would be difficult. > Ed "W" > >They keep it where they think it's safe. Mine is in a mix of bonds, mutual > funds and safe stocks which are easily convertable to cash, and I'm leaving > it right there for the time being instead of spending it or investing it in > something new or different. Some people may indeed stuff it under their > mattrasses. > > ***Ed, if you think that people with "money" in stocks, bond, etc will be > able to convetrt their holdings into cash, try converting $100 Billion in > credit money into $3 Billion in currency and coin. Why on earth would I try to do that? > The "credit money" takes many forms of "negotiable credt 'securities' and > does not include stocks. Stocks are not money. They are only a percentage > of the equity value of a company whose value is subject to the vagaries of > the market, supply and demand. If every $1.00 in stocks attempted to > convert into cash the result ing payoff would be 3 cents. Stocks can be converted to cash by selling them at their market value. > Harry? > > The present campaign, asking us to spend our way out of recession is > nothing short of ludicrous - unless your controlled economy is coming apart > at the seams and you'll try anything - absolutely anything. > > ***I agree. The lower interest is to allow the comapanies to "roll over" > their bank debt without declaring bankruptcy. "If" the recovery is to be > engineered by the consumer, why not reduce the interest rate on credit > cards. US consumers are "maxed out". The point is that the Fed and the Bank of Canada, and certainly the Bank of Japan, have already greatly reduced interest rates and whether or not it is inducing people to spend is questionable. IMHO, people are not spending because of uncertainty, not because they are maxed out, though that is a possibility too. > > Ed "W" > >Why is it ludicrous? Roosevelt tried it during the 1930s. Wartime spending > ended the Great Depression. > > ***Yes, it was money that was spent through wages that did not produce > consumer goods. People do not generally consume bombs. (well, the enemy > does) The wages were spent on the "over production" (underconsumption, take > your opick) financesd by the banks creating inordinate amounts of money to > finance production, (note the "roaring 20's, roaring 50's) world wide, same > as happened post 1975. > Ed W continued: > > Post-war spending on reconstruction accounted for the boom that lasted into > the 1970s. The New Deal of the 1930s tried to get things moving by spending and getting people working on public works projects of various kinds. I don't know how well that worked. My own view is that the Great Depression ended because of tremendous increases in production and employment (military) that came with WWII. Ever so many things were destroyed in WWII and had to be rebuilt. After being at war for four or five years, people also had to rebuild their lives. In other words, the war created a lot of "pent-up demand". And we mustn't forget that WWII was followed by the Korean War and the Vietnam War, each having a large demand on productive capacity. > *** > The overproduction post WWII, was absorbed by the working people by debt > financing through consumer credit on the one hand and the implimentation of > the welfare system on the other. I don't think it was a case of "overproduction". The need, whether good or bad, was real. > Ed W continues: > The economy was pretty active during the recent fibre optic and dot.com > run-up. When money circulates, goods move and production and employment rise. > > ***The reason the economy was so activce was the deregulation of the > banking industry (Read credit money creating industry) The deregulation > allowerd banks to monetise (create credtit money) on the basis of > "anticipated market value" rather than as previously "real value" The > creteria changed, therefore the amount the banks could create. C'mon Ed. Banks aren't going to leand money unless people want them to. I don't recall that there was much of a change in how banks were regulated between say 1996 and 2000. > > Harry continued: > > > > ED : "My general point is that, under > > conditions of instability, governments will do what they believe they have > > to do whether a currency is pegged to a commodity or not. Potentially, > > everything is in flux." > > ***The Gov and the people and the corporations are so dependant on the > Banks that they can hold any or all of the above to ransom any time they > like. If you believe this, you believe it. There's not much I can say. However, I think the problem is that you see one economic entitity as pulliing the strings and everything else dancing. Try looking at the economy as an integrated system. Problems in that system can arise in a number of different places. Right now, the main problem seems to be with consumers and investors. However, I may be wrong. It's a complex system. > Harry continues > > And the first thing they do is divorce their bits of paper from the > > commodity. If your piece of paper promises to pay an ounce of gold, that's > > what must be delivered. So, divorce is immediate. > > ***Good point! I agree. Instead of "ouce of gold" read "anything of really > useful value". And what might that be? Nothing is "forever", not even diamonds. > Harry continues > Sorry, but I prefer a stable, well managed currency to an ounce of gold. > My point is that anything can be well managed when social and economic > conditions are stable, as they were for a time during the gold standard. > However, stability is rarily the prevailing human condition. Sorry Ed G. I said that, not Harry. > You inadvertently make my point. I too prefer a stable well managed (by the > government, my representatives) currency to credit money that is privately > created and placed where it will make the maximum profit for those who > create it, the chartered banks. Ed G, it's a very long time since I studied money and banking, but I seem to recall that money in the form of credit is very closely watched, monitored and regulated by central banks. That's what Alan Greenspan is doing when he announces an upward or downward change in the rate of interest, and that's not the only means he has at his disposal. > > Harry added: > > > > >ED said : > "Nothing ever stands for all time." > > (addressing Harry), Hasn't gold been around - as a measure of value - for > umpteen > > millennia? > > Yes, the problem is that there is a disconnect between the value of what > modern technology can produce and the amount of available gold that measure > it with any kind of stability. The Nixonian disconnection from the > international gold standard that followed most countries (Swiss excepted) > disconnecting their economies from gold proves the point. > Gold can be remarkably streached, but it boggles the mind to spend > 1/1000ths of an ounce to buy a house. What do we use for razor blades? > > Ed W said > I recall that back in the 1970s, the price of gold was about three or > fourtimes its current price. > > ***My above point confirmed. > > > Certainly modern currencies stay around for intervals too short to measure. > > (Yesterday's dollar is not the same as today's dollar.) > > ***The above point confirmed again. The CB's are creating money without > oversight or control. Ed G, one reason for having central banks that function with considerable independence is to keep the politicians out of it. I was in Russia five years ago when the central bank was so weak as to be virtually non-existent and the politicians were printing money to pay their bills because the tax system wasn't working either. The value of the rouble had gone from parity with the US$ to 500 roubles to one US$. It was an unholy mess. To both Ed G. and Harry. This has been a good discussion, but I've got to quit now. We obviously don't agree, so let's leave it at that. Ed W.
