What is Money?

[drbrumley]

Bob, it is also true that if a government makes a law to kill Jews, I don't HAVE to kill Jews. Is that not correct. Just because slavery existed against the negro race doesn't and didn't mean I had to own a slave. And as part of the Articles of Confederation and the US Constitution, I have or had a right to speak out against such perversion as slavery.

I guess this isn't worth replying to huh?

 

[elohiym]

Let's consider why Bob's claim that banks create money when they lend has to be false, aside from the fact the Federal Reserve Bank claims in their publication Banking Basics on page six that banks lend depositor's money (not create it from thin air).

In the Federal Rerserve Bank publication Modern Money Mechanics on page 7 we are provided the bookkeeping entries for a $9,000 loan. It shows that assets (loans) increase $9,000 and liabilities (borrower deposits) increase $9,000. Notice two things: the bank's liabilities increase when making a loan, and those liabilities are called "borrower deposits."

If one could really create money from thin air then one would not have a liability. Who would the bank owe legal tender to if they merely created it with a pen stroke? Yet the bookkeeping entries show the bank owes $9,000 of legal tender. And that liability is matched to an asset called "borrower deposits." See? The borrower is made a depositor, and the deposit is the promissory note, and that is the money.

If the promissory note was not money deposited, then there would be no bank liability owing the value of the note. What Bob, and the banks, want you to believe (if you are dumb enough) is that the asset ceases to be money and the bank liability is the money. However, banks record legal tender as a bank asset, and a bank liability is owing legal tender.

Let's see Bob prove that owing legal tender is legal tender! :chuckle:

 

[Newman]

I believe my post got skipped in all of the hubbub. Let me try again:

Definition of Money: In the 1990s here at Bob Enyart Live, I wrongly believed that justice required a return to the gold standard, whereby currency was formerly backed by reserves of precious metals. So years ago, you could bring a $10 gold certificate into a bank and receive a certain amount of gold. After studying and thinking about money for years, reading economic texts and reflecting on the Bible, asking questions of internationally renowned economists, I now know that money is not gold or silver. [Update: For clarification, the definition of money is not gold or silver (although they can be used as money). But rather...] money is more like a transferable IOU. Most accurately, money is the accounting of a transferable incomplete transaction. That is what money actually is.

Money is just a medium of exchange. No more, no less. Gold and silver have been the most successful and have been the most used as such.

http://wiki.mises.org/wiki/Money

Metal, Paper, Web: Back when technology did not exist to support a more effective and lower-cost accounting system, Bible cultures reasonably implemented metal-based money. Since no one can create gold, no one could "counterfeit" gold coins, and silver coins. Later, the printing press enabled the convenience of paper currency, and initially, gold was used to back the paper bills that people used to transact business. Eventually, we kept the paper, but dropped the gold backing. Today, many people live without spending much paper currency at all, and they use digital bank accounts and online transactions over the Internet that provide tremendous convenience which helps to grow the economy. The extraordinary benefit to the lives of millions of people from these conveniences outweigh the risks of counterfeits and deception. And finally, there's the phenomenon of cyber cash on the web which is used similarly but not backed by the federal reserve or any national bank, and it's value changes daily based on real-world market pressures expressed in cyberspace.

But even "digital dollars" could/should be back by the precious metal. Just because something is convenient doesn't mean it's reliable, stable, or sound. In fact, the opposite usually holds true.

Here's What Makes the Economy Function: God commands men to "serve one another" (Galatians 5:13). Men shipwrecked onto a deserted island would gradually build an economy as they served one another. And that economy would grow most quickly if these men were free, for the Bible says that, "liberty" provides the "opportunity... [to] serve one another." If they started to keep to themselves, and did not trade goods and services, their economy would sputter and die. So an economy thrives when men serve one another.

An economy could thrive without any serving attitude. Economies don't grow because people want to serve people, unfortunately. Economies grow when entrepreneurs, capitalists, and consumers combine to supply and demand new technology that makes our wants and necessities easier to come by, safer to use/consume, and with greater quality.

Money Is Properly Created By Fiat: If these shipwrecked men washed ashore on a deserted island that had no gold, still, they actually would create money, "by fiat," as they entered into agreements that created something like transferable IOUs. Thus in any nation, every time someone buys a car or a home, etc., on credit, they thereby commit themselves to years of hard work (or at least, to the obligation to pay off the loan), which commitment actually brings more money into existence.

This is hogwash. The natural currency that would arise would be something durable, portable, recognizable, valuable, and divisible, or the best approximation or mixture of such characteristics. It would also probably have other functions besides serving as a medium of exchange.

Fractional Banking Is Justifiable: Understanding how money actually functions justifies the modern world's fractional banking system, whereby lenders bring money into existence when making loans, and expunge the principal as it is repaid. God regulated Israel's system of debt, showing that debt is not inherently immoral, but can be good or bad, like fire. As to the particulars of America's Federal Reserve System, the Fed should be audited (it never is), and other methods of implementing money may surpass the benefit of America's current system. The proper way to judge a monetary standard is to evaluate it's effectiveness (accountability) and efficiency (low cost).

Fractional banking is theft. Central banks fail. Fiat currencies don't work. The Federal Reserve has failed at all of its stated goals.

I believe in the separation of the economy and the state.

Gold is Not the Gold Standard in Money: Requiring a gold standard inflates the value of gold by fiat. As a result there is an unnecessary redistribution of wealth by which various governments transfer wealth to other countries that happen to find gold on their land. This is how America ciphered manufactured goods from Europe in return for inflated gold, and then we demineralized our money, devaluing England's vaults.

Actually, gold is more valuable when it ISN'T legal tender. See the price of and demand for gold since Bretton-Woods.

Gold Does Not Have Intrinsic Value: Gold does not have intrinsic value but as with all valued items, its worth lies in the eye of the beholder. A wealthy nation dying of thirst would trade its gold for water.

This is true. A first for this post.

Gold Is Not For Hiding: Basing a nation's currency on gold results in building Fort Knox-like fortresses, hidden from view, and filling them up with gold to back the certificates that are issued. But God did not create gold to be dug up and then forever buried again, stored away from sight in underground vaults, which is an inefficient and extremely expensive way of implementing an accounting system, robbing that gold from its practical uses for technology and beauty.

I don't know about God's intentions for whether gold is above or below ground (he seems to have put it below ground first, before we did). I think that individuals, private banks and storers should be in charge of keeping gold, not a government.

My "today's resource": www.mises.org

 

[elohiym]

I believe my post got skipped in all of the hubbub.

No. He addressed your post (some of it) here.

 

[elohiym]

Well, I took your challenge, Bob.

Hello elohiym! In the show, I roughly followed the outline of the OP, and so it might be easy for you to find the section in which I gave a simple overview of how fractional banking works. I expanded on this statement, that in the, "fractional banking system... lenders bring money into existence when making loans, and expunge the principal as it is repaid." Please feel free to tell me if you can identify anything I said about how fractional banking "actually works" that might be incorrect. I'd correct any error if I can be shown and convinced of it. (Emphasis mine)
Thanks!
-Bob Enyart, KGOV.com

In post #33 I showed you the bookkeeping entries for a loan transaction according to the Federal Reserve Bank publication Modern Money Mechanics that prove banks don't bring money into existence when they make a loan. Owing legal tender is not legal tender, Bob! :chuckle:

In post #42 I showed you the Federal Reserve Bank publication Banking Basics where the Fed claims on page 6 that banks lend depostor's money, not create it out of thin air.

You've been shown. Now time for you to explain why your are not convinced (if you're not), and then explain why your opinion of how fractional reserve banking works should be seen as true rather than what the Federal Reserve Bank claims about how fractional reserve banking works.

 

[Stripe]

Do you agree that inherent to the franctional reserve system is banks lending their credit, not their money?

If a bank lends something, the borrower has to get something. What he gets the bank loses (with the hope that they will get it back with interest).

So whether they lend what you call "credit" or whether they lend what you call "money" does not matter. The fact is that what they lend is of value. So you should rightly call what is lent "money" regardless of the form it takes.

 

[Granite]

In addressing Granite, who with e4e, has criticized me for not unquestioningly accepting our U.S. Constitution...

Incorrect: you appear to detest the Constitution and not support it, period, considering your willingness to replace it. I asked you this already and didn't get a response: why is your own suggested constitution no longer visible on the Shadow Gov site? It hasn't been for quite a while, that I'm aware.

 

[Granite]

Granite, back when that book was first published, we had dinner at a friend's house with Griffin and I eventually interviewed him in studio about the Fed.

All well and good, but you don't appear to understand Griffin or his book at all.

My conclusion that I had been wrongly convinced into opposing fiat money and fractional banking was not something that came lightly or without first studying, and even embracing, the alternative.

Swell. Doesn't change the fact that you've come down on the wrong side of this issue.

 

[Bob Enyart]

elohiym, 5th grade, 9th grade, & mises.org...

elohiym, 5th grade, 9th grade, & mises.org...

Bob... Banking Basics is a propaganda piece designed to intentionally deceive children and adults into believing that banks lend depositor's money rather than what you claim banks do when they lend money. You claim that "lenders bring money into existence when making loans..." In contradiction to that claim, Banking Basics states...

elohiym, I'll give you a quote below I got from another similarly linked Fed document from that same student's educational website that you've just quoted from. This quote explains, in a simplified form, that a bank creates money when making a loan. The document you've quoted from is over-simplified for "young people" beginning at "grade five" (see it's artwork attached). BTW, in my show I stated that I was over-simplifying also, to get the concepts across in order to discuss the principles involved.

Here's a quote from a Fed document, also linked to from that same Federal Reserve Educational site you've referenced. This is for students beginning in ninth grade:

Money Multiplier Scenario
Sarah Saver goes to Investors National Bank and deposits $1,000... She now has a checking account with a balance of $1,000 from which she can write checks. What will Investors National Bank do with this newly deposited money? Well, if there is a 10 percent reserve requirement, the bankers will put $100 in their vault and lend out the rest... Say Ernie Entrepreneur walks in... to borrow $900... If Ernie puts the $900 in his checking account, he can then write checks for that amount. There is now $1,900 of money available ($1,000 in Sarah’s checking account and $900 in Ernie’s) to be spent.​

That gets closer, and it's designed for our public school's ninth grade level. If you go to Newman's resource of the day, at mises.org, you'll find this quote from Robert Murphy who teaches Anatomy of the Fed at the Mises Institute and, not a fan of the Fed or fractional banking, describing the same scenario as above, Murphy wrote:

...the bank created $900 in new money, earned $45 in [interest], and then destroyed the $900 when Sally paid back her loan.

elohiym, do you agree that this is how I've been saying that fractional banking creates money, earns interest on the created funds, and then expunges that created money as it is paid back? And this is from the Ludwig von Mises Institute which, unlike most others, does not have a reputation as an institutional defender of fractional banking.

At this point, I believe you should correct your claim that "lenders bring money into existence when making loans..." based on what the Federal Reserve Bank claims in Banking Basics, or concede that banks do not bring money into existence...

Can't I choose other options? If so, I choose not to be known as an apologist for the Fed, but a defender of fiat money and fractional banking because such a system can function within God's principles of justice, and can be especially effective and efficient, thus benefiting mankind toward bringing billions of men, women, and children out of poverty.

-Bob Enyart, KGOV.com

2020 UPDATE: Just skimming through this thread. Six years after this post our son Michael emailed this same Robert Murphy about a disagreement he was having with his macroeconomics professor who was denying that a bank could use a deposit as a reserve to legally make a loan worth 10 times the deposit amount. He recommended his book co-authored with Carlos Lara, "How Privatized Banking Really Works". And he replied...

---------- Forwarded message ---------
From: Robert Murphy <*******@consultingbyrpm.com>
Date: Mon, Nov 20, 2017, 9:54 PM
Subject: Re: Fractional Reserve Banking
To: Michael Enyart <mikeenyart@gmail.com>

Well legally they can make a loan 10x as big, but they have to be careful because of interbank clearing operations. ...

 

[Bob Enyart]

... You're right, money is not gold or silver. But [they] can be [used as such]. So your correct there as well... Now back in the day, the "gold standard" if you will, all notes were backed by gold... today, it is backed by NOTHING!!!!! Would you agree with me thus far?

Dave, No. I don't agree.

Money is the accounting of transferable incomplete transactions. Federal reserve notes help us keep track of to whom these incomplete transactions are owed, proportionally, that is, to those who possess them, in proportion. As long as there is a society of people serving one another, as Adam Smith pointed out two centuries ago, in order to meet their own needs and desires, then those folks will want to participate in completing those transactions, and so the federal reserve dollars that I possess are backed by the commitment of millions of others to repay their loans, and to provide goods and services in return for services desirable to them. To say that our money is backed by nothing is to argue that the commitment of millions of people to work hard is nothing. So, again, money is the accounting of transferable incomplete transactions. And just as your double-entry accounting tables are simply ink on paper (or even less substantive, voltages in transistors represented by pixels), if your bookkeeper is effective, those entries represent real-world values, just as fiat money currency does.

-Bob Enyart, KGOV.com

 

[elohiym]

If a bank lends something, the borrower has to get something. What he gets the bank loses (with the hope that they will get it back with interest).

You haven't been paying attention, Stripe. The bank received a deposit from the "borrower" by fraudulently converting his promissory note into legal tender, then the bank increases its liability (owing legal tender) to the "borrower." That is why the Fed publication Modern Money Mechanics on page 6 states "borrower deposits" as the increased liability. In the Fed publication Two Faces of Debt on page 19 is states: "In exchange for the note or security, the lending or investing institution credits the depositor's account or gives a check that can deposited at yet an other depository institution. In this case, no one else loses a deposit" (emphasis mine).

Note the credit is to the "depositor's account" meaning clearly that the "borrower" is a depositor, meaning, as I have already explained in great detail, that the "borrower" is made a depositor without his knowledge or permission. This is incontrovertible proof that fractional reserve banking is inherently immoral because it always requires fraudulent conversion to accomplish monetization of the promissory note.

Now, before you exclaim "The bank gives a check!" Understand that a check is not money under the Uniform Commercial Code; it is an order to transfer money. A check without legal tender backing it is worthless. The check the bank gives is backed by the promissory note itself that has been fraudulently converted into legal tender. Why fraudulently? Because to legally own a $9,000 promissory note the bank had to first give the "borrower" $9,000 legal tender; but the bank doesn't do that; instead it essentially steals the promissory note, monetizes it, then "loans" that legal tender to the "borrower." To avoid the appearance of tax fraud the bank records a bank liability to the "borrower" for the "borrower's deposit" (their term) proving that the bank actually received a loan from the "borrower," not the other way around.

So whether they lend what you call "credit" or whether they lend what you call "money" does not matter.

It matter a great deal, Stripe, whether you think is does or not, or whether the banks claims it does or doesn't. Banks are governed by the bank charter and have no license to do what you are suggesting they can do. In fact, a bank lending its credit ultra vires; it's not legal. A bank can, logically, only lend its money, and cannot lend its credit by law:

“A bank may not lend its credit to another even though such a transaction turns out to have been of benefit to the bank, and in support of this a list of cases might be cited, which-would look like a catalog of ships.” Norton Grocery Co. v. Peoples Nat. Bank, 144 SE 505. 151 Va 195.​

So it does matter, Stripe.

The fact is that what they lend is of value.

First, they don't lend anything. According to the bookkeeping entries, the bank borrows the loan amount from the "borrower" by fraudulently converting his promissory note into legal tender. The bank then returns the money it borrowed and calls it a loan from the bank to the "borrower." Second, the value they claim to "lend" comes entirely from the "borrower" according to the bookkeeping entries. This is incontrovertible, Stripe, whether you understand what's occurring or not.

So you should rightly call what is lent "money" regardless of the form it takes.

Then you should not call abortion murder because evil people have refused to define it by the appropriate term. And you should believe all the Orwellian newspeak you hear. Bitter is now sweet. Evil is now righteousness. Owing legal tender is now legal tender. An exchange of IOUs is now a loan. Stealing money is now creating money.

You must understand, no banker or bank auditor will admit to any of this because if they did they would go to jail. And if you consider how much wealth is being stolen by this scheme, which has the same economic effect as theft and counterfeiting combined, you might grasp who holds the power in the U.S. (and the world), and why you are not going to hear this scam exposed on the evening news.

 

[elohiym]

The document you've quoted from is over-simplified for "young people" beginning at "grade five" (see it's artwork attached).

The publication is for grades 5-12; its target audience is teachers and students; and the artwork is irrelevant to whatever point you think you are making because other Fed publications written specifically to an adult audience have similar artwork.

Your claim that is "over-simplified," is a misrepresentation because it states accurately, as I have, that banks get the money (legal tender) to lend from depositors. It is inaccurate only in that banks don't get the money from "savers" but "borrower's deposits," which is consistent with all of the Fed publications I have quoted so far.

BTW, in my show I stated that I was over-simplifying also, to get the concepts across in order to discuss the principles involved.

Equivocation. And, once again, you are evading my points.

Here's a quote from a Fed document, also linked to from that same Federal Reserve Educational site you've referenced. This is for students beginning in ninth grade:

Money Multiplier Scenario
Sarah Saver goes to Investors National Bank and deposits $1,000... She now has a checking account with a balance of $1,000 from which she can write checks. What will Investors National Bank do with this newly deposited money? Well, if there is a 10 percent reserve requirement, the bankers will put $100 in their vault and lend out the rest... Say Ernie Entrepreneur walks in... to borrow $900... If Ernie puts the $900 in his checking account, he can then write checks for that amount. There is now $1,900 of money available ($1,000 in Sarah’s checking account and $900 in Ernie’s) to be spent.​

You think that makes sense, Bob? :chuckle: All of Sarah Saver's money is right where she deposited it, in her account. You have already conceded by implication that $900 of Sarah's money is not loaned out! You claim the $900 is created! What you and the banks need to prove up is where the alleged "created" money came from. To actually be created, it must come from thin air. If the bank monetizes Ernie Entrepreneur's promissory note, then the bookkeeping entries prove the bank received $900 from Ernie.

That gets closer, and it's designed for our public school's ninth grade level.

That's deception on your part, Bob. The Fed educational website states clearly that the publication I cited, Banking Basics, is for teachers and students grades 5-12. You implying that because your material cited is for ninth grade while implying falsely that my material cited is for fifth grade (see your post title) is somehow a better treatment of the subject is pure deception on your part; and frankly, it hurts your credibility beyond this discussion.

If you go to Newman's resource of the day, at mises.org, you'll find this quote from Robert Murphy who teaches Anatomy of the Fed at the Mises Institute and, not a fan of the Fed or fractional banking, describing the same scenario as above...

Robert Murphy is not a CPA, but an adjunct professor of economics, and he apparently has no clue what the bookkeeping entries he cites in his own article prove (They proves my position, Bob. :chuckle. It's also possible that he, like so many others, are spreading false propaganda knowing fully what is going on. I will assume that he has simply taken the central bank's word at face value as you have. They say "we create money" and he believes them because he doesn't understand the scam, or doesn't understand the definition of words.

I learned what I know from a CPA who learned it from CPA bank auditors and former bankers concerned for the nation, and I spent the last decade studying the issue.

elohiym, do you agree that this is how I've been saying that fractional banking creates money, earns interest on the created funds, and then expunges that created money as it is paid back?

So your argument is that banks create money when they make loans because people claim they create money when they make loans? :squint: I doubt you will argue that abortion is not murder because the medical and legal establishment calls it something else. Woe unto those who call bitter sweet, Bob. Don't join them in their folly.

And this is from the Ludwig von Mises Institute which, unlike most others, does not have a reputation as an institutional defender of fractional banking.

Bob, you are going to have stop being gullible. The bookkeeping entries don't lie, and you have them right in front of you. Explain the liability to the bank, if they "create" money. Prove owing legal tender is legal tender. Explain why the bank liability is called "borrower deposit." Explain how a bank can legally own a promissory note without first giving the "borrower" legal tender. Prove that banks "have a license to print money." In short, address my points and prove your position is not a fantasy.

Can't I choose other options?

You can choose to serve whoever you want. But I strongly suggest you don't attempt to deceive people as you have with your post title. That was really low, Bob. You tried to imply that the material I linked to was for fifth graders and the material you linked to was for ninth graders while concealing that the material I linked to was for grades 5-12, and evading my salient point in post #42 that if an adult calls a bank and asks them where the money to make loans comes from they will be told the same thing as in the 5-12 grade publication I linked to (I have recorded conversations with banks proving that).

If so, I choose not to be known as an apologist for the Fed, but a defender of fiat money and fractional banking because...

Three separate issues, Bob. I have no objection to fiat money, just governments making fiat money legal tender; that appears to be something you are an apologist for. If not, then address my points regarding the matter.

The Federal Reserve Bank and fractional reserve banking per se are inherently immoral. They operate based on the fraudulent conversion of wealth and an illegal monopoly on the issuance of legal tender through that fraud.

...such a system can function within God's principles of justice, and can be especially effective and efficient, thus benefiting mankind toward bringing billions of men, women, and children out of poverty.

Your idealism ignores reality, Bob. Guess you missed the financial meltdowns over the last century and how much misery and poverty they have caused, directly and indirectly, worldwide. Guess you just can't grasp how any system that necessitates fraudulent conversion is inherently immoral. And it's clear that you either don't understand the meaning of words (like asset, liability, legal tender, etc.) or you are intentionally using Orwellian newspeak.

 

[Newman]

No. He addressed your post (some of it) here.

My bad. Thanks.

 

[elohiym]

Bob,

I recommend you watch the film The Secret of OZ. You can watch it free on YouTube. Here's the video:

The Secret of Oz

It's an excellent film, although Bill Still unfortunately parrots the same misunderstanding, claiming the "banks create money from thin air." What I like about the film is that it leaves one with no doubt that fractional reserve banking is inherently evil. The film discourages the return to the gold standard by showing that it was the banks throughout history that wanted a gold standard. And it shows how government issued debt-free fiat money has worked throughout history and why it has been violently opposed by the bankers.

 

[elected4ever]

Bob,

I recommend you watch the film The Secret of OZ. You can watch it free on YouTube. Here's the video:

The Secret of Oz

It's an excellent film, although Bill Still unfortunately parrots the same misunderstanding, claiming the "banks create money from thin air." What I like about the film is that it leaves one with no doubt that fractional reserve banking is inherently evil. The film discourages the return to the gold standard by showing that it was the banks throughout history that wanted a gold standard. And it shows how government issued debt-free fiat money has worked throughout history and why it has been violently opposed by the bankers.

I think he is right on. It does not really matter if the banks create money of not, the fractional banking system has that effect.

I am not a gold bug because there is not enough gold to fund the nation. The problem is that the states are required to pay their debts in gold making a gold standard mandatory, constitutionally. I am in favor of a debt free currency printed by the government. The value to be established by congress, the repeal of the entire bank basted monetary system and making reserve banking a form of counterfeiting.

 

[elected4ever]

Originally Posted by Bob Enyart


e4e, I claimed that, "Requiring a gold standard inflates the value of gold by fiat" to which you replied:

Regardless of some inscrutable particulars, the law of supply and demand determines value, and if a government requires gold to back its currency, the government thereby significantly increases demand and limits the supply of gold as a commodity. So e4e I don't know how you could disagree that requiring a gold standard would inflate the value of gold. And that would happen by fiat, that is, by the word of a government official, or a constitution, requiring a gold standard.

-Bob Enyart, KGOV.com


Fiat---- An Order issued by legal authority. To become, to come into existance.

The government did not issue any order, gold did not become gold by order of the government and gold certainly did not come into existence because of the government. Therefore gold is not a fiat of man or any power on earth. God is the sole creator of gold. It is God's fiat and no one else can clam that distinction. It exist regardless of man's efforts and you are right in that it exist in a limited supply. Government does not create gold and should not determine how much of a product a certain amount gold will buy. The value is determined by supply an demand.

As I have stated before the constitution has provided that gold is the medium to be used to create the currency of the United States. A unit of measurement of gold was to be used to determine that basic standard of measurement called a dollar to provide a consistent measurement on which the free market can determine value. That unit of measurement is called a dollar and the content of gold in the dollar is to be determined exclusively by the congress of the United States. Not the president, not the courts and certainly not any privet bank of any discription. The dollar is a fiat (creation) of the congress and its value is the value the free market says that amount of gold is worth.


More to come but I have to let my wife use the computer now.

 

[elected4ever]

Lets say you gave a $50 double eagle for a certain idem and you put a it up for resale $100. I give you $100 Federal Reserve Note that are now considered US currency and are legal tender. You take those Federal Reserve Notes in payment and then go and try to buy a second idem with FRNs that I gave you and the man says I wont $1500 FRNs. Which is the real Dollars?

The truth is, for you and for me, we will meet our obligations with the cheapest solution possible. When the Federal Reserve Notes become unassociated with gold or silver there was no restraint on the Federal Reserve or congress to print as much as they wonted. They in fact flooded the market making the FRNs worth less and that requiring more of them to buy the same products. The things we buy are not worth more, it is just that what we buy them with is worth less. Just as the $50 double eagle is an actual $50 the Federal Reserve Notes are not by a ratio of 300/1. A person would be a fool to do what was described in the first paragraph.

 

[elected4ever]

Stripe, your question brings up a great observation made by Thomas Sowell and others, that:

"Blaming an economic crisis on greed is like blaming a plane crash on gravity."​

Your question can be restated:
Is there anyway that business would work if people were not so corrupt?
Is there anyway that contracts would work if people were not so corrupt?
Is there anyway that _______ would work if people were not so corrupt?

Any system of money must be effective (provide accountability, to God and man), and then efficient (convenient to keep down the actual cost of the accounting).

I think that the only true answer to this lies in a fundamentally Christian worldview:

Human beings function best living in freedom constrained by God's criminal justice system to properly punish and therefore deter crime.​

-Bob Enyart, KGOV.com

God has no criminal justice system. At least not here. There is no law from God or anyone else that takes away the liberty we have received from Jesus Christ. Do not try to impose law on me through the back Door.

 

[Clete]

Bob,

I read your article on money a couple of weeks ago while rummaging around your website. It's been on my mind off and on ever since because I can't recall having ever read anything of yours with which I so thoroughly disagree.

This never happens! Even when it has seemed liked I disagreed with you on some issue in the past, it generally takes about ten to fifteen minutes of looking into it further for me to discover that I had misunderstood you or that I was otherwise mistaken. As a result I've become conditioned to trust your judgment and find it very discomforting when any disagreement I have with you lasts more than a day, never mind several weeks.

All that to say that I half expect to be convinced that either I'm wrong or that I've misunderstood your position. But only half.
Here are my thoughts in reaction to your article, you tell me how I'm wrong. (I should point out that I've neither watched the show nor read more than just the first several posts on this thread.)

My first problem with your thesis on money is your attempt to redefine what money is. There is no need to do such a thing. Money is any object or record that is generally accepted as payment for goods and services and repayment of debts in a given socio-economic context or country. It is NOT any sort of incomplete transaction UNLESS the medium of exchange has very little or no REAL value. That is to say that so long as the money is actually MADE before it is exchanged, any transaction made with it is complete unless otherwise agreed to by all the parties involved. The reason this is so is because real money (i.e. as apposed to fiat currency) represents work. It does NOT represent work to be done but work ALREADY completed. Real money must be earned and exchanged between parties by mutual consent for mutual gain. Anything else is theft in one form or another.

It is only in a fiat currency economy where your definition would have any application whatsoever and I submit that such economies are in fact based on theft. It is theft because any party which can arbitrarily inflate the currency supply gets to use that currency at today's rate of exchange while the very act of using that currency is what decreases the value of everybody's currency. So now, after the currency makers have spent their fiat cash, the currency I was paid for work I performed or for services I rendered is cheapened. Its as if I was paid for 9.9 hours of work when 10 hours of work was actually done. The money makers stole 6 minutes of my work, of my life! And that's assuming a mere 1% inflation rate, the reality is, of course, far worse and is THE reason why the average person's standard of living remains basically the same even when his salary is regularly increased. His employer pays him each year with cheaper and cheaper dollars for work that is increasingly more valuable due to the employee's increased experience level. Inflation is the super rich and powerful stealing the life work from the common man.

Any economic activity that arbitrarily increases the currency supply performs this same theft, including fractional banking. No bank, no entity of any sort, should be permitted to loan out money that they do not have. And they most certainly should not be permitted to charge interest on money that didn't even exist before the "loan" was signed!

Now, as for gold, silver and other commodity based money being fiat money. The only way I can understand your having come to this conclusion is by having misunderstood the use of the word 'fiat' in the context of money. A fiat currency is one where the government or a bank or some other entity can arbitrarily increase or decrease the supply of that currency. It isn't referring merely to the fact that someone somewhere decided to use something as a medium of exchange as your comments seem to suggest.

Gold is money by definition (i.e. it is not currency). Not only is it money it is almost certainly the best possible money that there could ever be. Why? Well because those who have it earned it (i.e. not counting criminals, of course) and as such aren't generally willing to part with it without getting something of equal value in exchange. Gold cannot be printed, nor can you get away with simply pretending it exists in order to loan it out and collect interest on the pretend gold. (Gold also has the advantage of having a relatively low industrial demand where the commodity is used up in a manner which renders it unrecoverable as in the case of copper or silver.) Thus its value is based on REAL supply and demand. With fiat currencies the government attempts to alter both the supply and the demand for their currency by altering the actual supply of the currency or by altering interest rates that their banks charge for borrowing the money that didn't exist before you borrowed it. Both activities are theft and both are impossible when gold is used as money.

The only way to control the money supply under a true gold standard would be for the government to hoard gold and then dispense it out at varying rates to "control" the supply. But think through what would happen if a government attempted to do such a thing. If the government started buying up a bunch of gold in order to hoard it, that would simultaneously decrease the supply of gold and increase its demand (i.e. governmental demand counts as real demand in the physical gold market) sending the value of gold through the roof. This would be deflationary in the economy, the only fix for which is for the government to sell its store of gold thus increasing the money supply and decreasing demand thereby dramatically lowering the value of gold. In other words, if there is a real gold standard in place, the government only stymies its own goals by attempting to hoard gold. The more they hoard, the more its worth and the bigger the desire to spend it becomes and the smaller the reason to hoard it becomes.

Gold regulates its own value!

This is so because the only real way to alter the gold supply is to dig more of it out of the ground, which is really hard to do and isn't going to be done for free and is usually done at great expense and risk of loss. In other words, those who dig it out of the ground EARN it.

And that is really the key issue, the issue of having earned what you own and getting justly compensated for that which you produce. Loaning out money is a vital activity for any economy. It is in fact what grows an economy. But one should not be permitted to charge interest for money that didn't exist before the loan was signed. Interest is called "interest" for a reason. A banker in a just economy takes an interest in what you intend to do with the borrowed money because he is taking a risk of loss by lending it to you. The money you pay in excess of the principle is his compensation for having accepted that risk. It is his interest (i.e. his potential gain) in the transaction. Otherwise, he would very rarely, if ever have any reason to make a loan to anyone. But there is no risk involved, or at least the risk is very nearly eliminated where one is loaning out money that didn't exist prior to the borrower signing the paper work. What then is the lender being compensated for, filling out the paper work and accepting your monthly payments? And if the lender only has to have 10 cents in deposits for ever dollar he loans, his charging of 5% interest yields him a bonanza in profits on the money that was actually at risk. If someone mortgages a house for $100,000 and pay $900/month for 30 years, the banks put $224,000 in its pocket over the life of the loan while having only put $10,000 of it own money at risk! Talk about usury!

Further, just to nail down the point that fractional banking is inflationary, the factions in fractional banking never stop. Bank A has $1,000,000 in deposits and can therefore loan out $10,000,000 to its customers. Bank A's customers deposit the money they borrowed from Bank A into Banks B, C, D, E, F and G. All of whom can now loan out a combined total of $100,000,000. So in a fractional banking system where banks are permitted to loan out 10 times their actual deposits of fiat currency, the currency supply is increased by 100 fold in only two complete iterations. Its a Ponzi scheme! Now, of course, the larger the currency supply, the longer each iteration would take to complete and as each loan it paid off the money supply does shrink but notice that it could never shrink all the way back to where it was before that first fractional loan was made. The interest paid on that made up money doesn't vanish from the currency supply like the journal entry for the principle does. It's permanently part of the economy and contributes its part in the devaluation of your work and mine.

Resting in Him,
Clete

P.S. I know a rambled on a bit with this post and I sort of repeated myself a bit here and there but I just sort of spit out onto the screen the things that have been rumbling around in my head for the last few weeks. It is my hope that whichever of us is right will be able to convince the other. God bless you!

 

[Clete]

Bump!