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Anonymous Coward writes:
"http://www.theguardian.com/commentisfree/2014/mar/ 18/truth-money-iou-bank-of-england-austerity
Back in the 1930s, Henry Ford is supposed to have remarked that it was a good thing that most Americans didn't know how banking really works, because if they did, 'there'd be a revolution before tomorrow morning.'
Last week, something remarkable happened. The Bank of England let the cat out of the bag. In a paper called "Money Creation in the Modern Economy", co-authored by three economists from the Bank's Monetary Analysis Directorate, they stated outright that most common assumptions of how banking works are simply wrong, and that the kind of populist, heterodox positions more ordinarily associated with groups such as Occupy Wall Street are correct. In doing so, they have effectively thrown the entire theoretical basis for austerity out of the window."
(Score: 4, Insightful) by Tork on Tuesday March 25 2014, @03:52AM
Heh. Shaking their heads with their hands on their foreheads is not 'depression'. Basically you've described not-supply-and-demand, a pricing structure often used by people with booths at the flea market. What any of those annoyed econ graduates would tell you is that "Value" is what you'd be willing to give up to have something. Value is not set by the seller, but by the buyer. What the seller does set is the price, in which case, he or she hopes to find the demand for it. The price goes down until that happens. (Check out Microsoft's recent music players and tablets...)
Economics is a complicated subject because people are complicated, but it is certainly not a faith-based-belief system. (That is unless you'd like me to dust off the 'indistinguishable as magic' cliche...)
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(Score: 0, Troll) by Boxzy on Tuesday March 25 2014, @03:57AM
You are talking about products not vague concepts like money. The two are lightyears apart.
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(Score: 1) by Tork on Tuesday March 25 2014, @03:59AM
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(Score: 2) by Boxzy on Tuesday March 25 2014, @04:08AM
Wow, what an amazing argument. I give in. The American economy relys on its brutal ownership of the oil industry to keep afloat. while the rest of the world is forced to buy and sell oil in dollars no bad checks will be cashed on the US's horrendous economy. If you want hundreds of examples of why this is true just look at the war history of General Smedley http://r.duckduckgo.com/l/?kh=-1&uddg=http%3A%2F%2 Fwww.wanttoknow.info%2Fwarisaracket.shtml [duckduckgo.com]
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(Score: 1) by Tork on Tuesday March 25 2014, @04:10AM
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(Score: 2) by Boxzy on Tuesday March 25 2014, @04:24AM
I never attempted to disprove your disproveable statement, I posted a more generally important concept, that what you rely on is a lie.
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(Score: 1) by Tork on Tuesday March 25 2014, @04:32AM
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(Score: 3, Insightful) by Fluffeh on Tuesday March 25 2014, @04:09AM
If you consider currency traders, I think that money can be treated as a product. Also considering all the people that "invest" in money by saving it, it pretty much is a product.
Of course, as a totally abstract level, if all form of trading is compared to a barter system - goods of one sort for another, money simply becomes another good to be traded.
I don't think that the two really are lightyears apart.
(Score: 1) by Tork on Tuesday March 25 2014, @04:16AM
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(Score: 2) by Boxzy on Tuesday March 25 2014, @04:29AM
Value is most definitely value. When money collapses, food, building materials, fertilizer, many things remain of value. MONEY DOES NOT. the two are lightyears apart.
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(Score: 2) by Tork on Tuesday March 25 2014, @04:30AM
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(Score: 1) by SleazyRidr on Tuesday March 25 2014, @02:57PM
What about when someone comes up with a better fertilizer and the price of fertilizer collapses?
(Score: 1) by Boxzy on Tuesday March 25 2014, @03:16PM
You are comparing replacement of one product with another product with lack of belief in an intangible faith? Let me rephrase your statement. "what happens to scientists when someone comes up with better science? Do they suddenly believe in god?" Makes no sense.
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(Score: 2) by SleazyRidr on Tuesday March 25 2014, @07:21PM
I have no idea from where you pulled conjectures about the belief in God. I was making the point that the "real" assets you mentioned are also subject to price fluctuations, albeit to a more limited extent than money, owing to their more limited application.
(Score: 3, Interesting) by unitron on Tuesday March 25 2014, @04:54AM
Perhaps not as far apart as you think.
Anything only has value if you can get a buyer and seller to agree on that value, which is why anyone selling Beanie Babies needs to find a buyer other than myself.
But the law of supply and demand applies to both "goods and services" and to "money".
If there's a lot of money floating around out there, bread is going to be $4 a loaf instead of $2, because the increased supply of the money results in a perception that the value of each individual unit of it is less.
If there's a lot of money available for lending, borrowers can "buy" it for an overall smaller "interest plus principal" because the lenders are competing with one another to get you to "buy" their supply rather than the other guys, but if money is tight lenders compete with each other by offering to repay a higher total.
Supply and demand is like the broad concept of evolution--once you start looking for it, you find it everywhere, in one form or another, and they can even be inextricably intertwined.
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(Score: 0) by Anonymous Coward on Tuesday March 25 2014, @10:32AM
You must use a mighty large font.
(Score: 1, Troll) by Boxzy on Tuesday March 25 2014, @04:20AM
Would you like me to dust off the stock-market-is-a-scam-fixed-by-the-nsa-by-using-c orporate-espionage? or is that still a paranoid conspiracy theory in your tiny mind? We know corporations swap data with the nsa, we know they get zero days in return.
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(Score: 1) by Tork on Tuesday March 25 2014, @04:25AM
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(Score: 1, Flamebait) by Boxzy on Tuesday March 25 2014, @04:37AM
Just because you wave an economics stick at it doesn't make it magic. Products have intrinsic worth because they exist after economic collapse. Money ceases to exist after economic collapse. Money is faith based, products are reality based.
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(Score: 1) by Tork on Tuesday March 25 2014, @04:38AM
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(Score: 0, Flamebait) by Boxzy on Tuesday March 25 2014, @04:49AM
WTF! You claim after economic collapse, money will blah blah! you idiot!
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(Score: 0, Troll) by Boxzy on Tuesday March 25 2014, @04:44AM
I now DEMAND you prove me wrong. otherwise get fucked. So sick of BS economists talking shit.
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(Score: 5, Funny) by Tork on Tuesday March 25 2014, @05:21AM
Well... since you so obviously do not understand Supply and Demand I don't really know that I can. I guess I can take a stab at it with a metaphor: A football stadium filled with 50,000 spectators is having a game in the middle of a hot day. At the gate all bottles of liquid are confiscated for 'security reasons'. Inside the gate the price of a glass of water is $10.00, and people are paying for it.
You stood up and said: "See! They just make up a price and people pay it!" But the high school economics teacher behind you closes his eyes and counts to ten. He calmly says to you: "No, it's supply and demand. He cannot charge infinity, he can only charge what people will pay.. and people, right now, are paying."
Realizing the mistake you made, you hoped he didn't hear you clearly. "No no no...", you said, "... I meant some invisible person randomly decided that these ten dollar bills are worth a glass of water!" The high school economics teacher chuckled to himself, politely said "no, it isn't", and started to walk away. But this embarrassment couldn't go unanswered, and you persisted. "The stock market is a big scam!"
Again, the teacher smirked, and briefly explained that the stock market is just a variable in the current of an economy. The individual variables can change on the whim of what humans decide to do, but it's just the variables, faith is not relevent. At this point you stopped to pick your nose and eat a booger, then in the hot summer air the stink lines started to dance around you like a sketch of Pig Pen from the old Peanuts comic. You attempted to restate your case, but your lack of understanding of what Supply and Demand is, much to the amusement of the teacher, is preventing you from seeing that money is simply a proxy for a product being bartered. You don't understand the difference between faith and confidence.
The teacher spent ten more minutes giving you one final lesson. He told you a little story about a theme park and the price of Coca Cola in it. You were flippant with him so he wasn't super polite in his relaying of this story to you. It wasn't his finest moment, but he felt goaded into it. You were unwilling to listen to what he said because you were dead set on not being wrong the first time. You had no room to discuss, only debate. He walked away with a shrug. You stayed behind to defend your assertion and died alone and a virgin. By the time your body was carried away, the city you live in had a bunch of Google employees move in and ticket prices jumped 800% and still managed to sell out. The teacher, after making love to his hot wife, decided to look you up to see how you're doing. Well, he didn't find you on Facebook because you have no friends, but he did find your obituary. He paused for a moment, in silence, to pay his respects. Moments later he pictured you plunking your heavily-worn credit card down at the ticket counter and grumbling about how they just make up these prices, and his moment of silence was interrupted by a snort.
The End.
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(Score: 1, Flamebait) by Boxzy on Tuesday March 25 2014, @05:38AM
Dogdammit you idiot, you invented yet another example where there is no choice but to pay. I'll go back to oil. Every country in the world is forced to buy and sell oil in dollars. This isnt a case where there is another market, Iraq tried selling oil in Euros, a week later Mr Bush decided to invade. The US relies on its ownership of the oil trade, this is NOT free trade, this is not economics, this is brute force. Your series of pretty insults are pretty, no doubt of that but seem ugly to any other country.
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(Score: 0, Flamebait) by Tork on Tuesday March 25 2014, @05:43AM
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(Score: 2) by maxwell demon on Tuesday March 25 2014, @09:11AM
It is power. Which is also based largely on faith.
Oh, you think the Iraq war disproves it? Well, there's the old quote from Carl Sandburg, "Sometime they'll give a war and nobody will come." OK, the soldiers did go there. But why? Because they had faith. Either faith in that it was the right thing to do, or faith in that the military system would have the power to punish them if they didn't go. And yes, the second thing, while true, is also based on faith: Namely the faith of those who do the punishing that they may, or even must, punish it.
All power is based on faith. If nobody believed Obama would have any power, Obama would not have any power, regardless of the results of the last elections, or of what the constitution says. People would just ignore him, and there would be little he could do about it.
And since money is ultimately a form of power, it is not really a surprise that money is also based on faith.
The Tao of math: The numbers you can count are not the real numbers.
(Score: 2, Insightful) by Boxzy on Tuesday March 25 2014, @05:47AM
Not one word of that was a proof that value of money exists after monetary collapse and that value of products is tied to money. Face it, the barter economy will survive capitalism WHEN it fails.
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(Score: 0) by Anonymous Coward on Tuesday March 25 2014, @05:50AM
(Score: 0) by Anonymous Coward on Tuesday March 25 2014, @04:23PM
(Score: 1) by urza9814 on Tuesday March 25 2014, @05:22PM
(Score: 0) by Anonymous Coward on Tuesday March 25 2014, @06:32PM
> Products don't lose value like that.
Yes, they do. It happens often, and frankly as a visitor of this site you should have seen it happen a thousand times by now. Value is complicated to measure and that's why it's tempting to think of it as 'faith-based', but it doesn't actually work that way. If it did we wouldn't be able to have this discussion right now.
(Score: 1) by khallow on Tuesday March 25 2014, @10:25PM
that value of money exists after monetary collapse
How does that support your claim? Markets for concrete things can collapse as well.
Face it, the barter economy will survive capitalism WHEN it fails.
You were speaking of money not capitalism which is merely the private ownership of capital (something which incidentally can continue even in a barter economy). It's worth noting that many monetary collapses have happened over thousands of years of recorded history since the development of money. What happens is not that society permanently devolves to the barter economy, but rather that it finds new mediums of exchange and keeps on moving.
One merely needs to consider a few real world examples. Consider what happened to the economy in the multiplayer version of Diablo II. The game is a fantasy-themed resource extraction game. Players kill "monsters" in the game which generate a variety of loot. There is a lottery aspect to the game since a variety of items can be randomly transformed into new gear with somewhat random benefits. The game has an official currency, "gold" which is dropped by most monsters and for which virtually all items can be sold in NPC stores. But gold became so prevalent and the use of it in game so limited, that it was near worthless. Did the gaming community then devolve to the barter economy? No, they instead used certain scarce items as currency, particularly, a magic ring called a "Stone of Jordan" [diablowiki.net].
This is the thing that people don't get about money. It has extraordinary usefulness when it is honored as a medium of exchange. So even when markets don't have a viable currency for some reason, they often will make, ad hoc, a new one to replace that.
(Score: 1) by Boxzy on Thursday March 27 2014, @02:10AM
that value of money exists after monetary collapse
How does that support your claim? Markets for concrete things can collapse as well.
Jeez, explaining the obvious gets really old. THE MARKET is just another way of saying MONEY.
When markets collapse, when your whole monetary system collapses, the money vanishes into thin air. Concrete things can be bartered for other concrete things. CONCRETE THINGS DON'T VANISH. Sure you can't sell them for Market price after the market goes away, but I would have thought that was obvious. The thing to do, to increase your ability to survive, is to trade in USEFUL goods and products. ie. not gold, not silver, not various futures, not shares in facebook or whatever flavour of the month BS artist is generating faith this month. Remember Apple? how the products are sub-par but the perceived value is high? MARKETING. Yes, marketing is the entirety of the 'market' there's no there there. Just a lot of hot air and a strong smell of BS. and yes, I'm prepared for another round of downmods, just shows how angry and you all are and how much you need what I say to be wrong. How many of you downmodding me are athiests? You depend on this belief system that the almighty dollar and the pursuit of profit are above all criticism yet claim that those who believe in other non-physical ideology are crazy. Lots of hypocrisy around today.
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(Score: 1) by khallow on Thursday March 27 2014, @11:24AM
Yes, I'm aware of how it works because this sort of collapse has happened before (for example, hyperinflation). But in modern times, it hasn't been hard to reestablish a currency and markets again after the collapse. One merely needs to look at real world examples to see that you haven't thought this through.
And MARKETING != markets. You conflate two unrelated concepts.
(Score: 2) by Daniel Dvorkin on Tuesday March 25 2014, @09:34AM
The great thing about argument by parable is that you can make the characters do anything you want them to.
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(Score: 2) by bucc5062 on Tuesday March 25 2014, @01:20PM
"Inside the gate the price of a glass of water is $10.00, and people are paying for it."
How did it get set at $10. A serious question. Did it get set at $10 because the cost of collecting, bottling, distributing, selling, labor set the price? Or was it that the person controlling the water made up a number to see if people would buy, then kicked himself when they did for maybe he could have set it higher. For that matter, with all that demand, does the price climb as his supply dwindles then is the price set purely by how much one is willing to pay?
Last time I took and Econ 101 course was many many moons ago, but I do remember the concept of supply and demand (a pretty simple model in today's world). I accept that S/D impacts price, but what determines that initial value?
In the collapse of civilization the value of existing money collapses, but does the nature of money really go away? Money has value today so that is what we use to trade for goods and services. Could not a barter system have money? Perhaps a carpenter barters with the farmer, two chickens for a chair. the "money" for the carpenter is time, how long will it take have a value. The farmer also took time to raise the chickens, the chickens have value thus the exchange of money is time for goods as services. Overall I think a better world that would be then this swamp we live in today.
So, the real value is not in some arbitrary thing we call money, real value is in the time it takes to create or off a good or service. You cannot horse other peoples time nor your own so greed becomes moot.
The more things change, the more they look the same
(Score: 1) by monster on Tuesday March 25 2014, @03:01PM
Money is to the economy like the oil of an engine: Strictly speaking, it's not needed to work, but makes maintenance and performance a hell of a lot simpler.
(Score: -1) by Anonymous Coward on Tuesday March 25 2014, @06:52PM
> A serious question. Did it get set at $10 because the cost of collecting, bottling, distributing, selling, labor set the price?
It got to that price by people paying for it.
> So, the real value is not in some arbitrary thing we call money...
The parable did not confuse money and value.
> ...real value is in the time it takes to create or off a good or service.
Yeah you've forgotten a fair chunk of your econ 101. The value you're talking about is the lowest number that product will reach when competition is in place. That was not part of this parable, that was probably intentional because you were trying to make the point that because people can manipulate supply and demand that it is faith based. That is not the case. Even if everybody in that stadium knows the raw cost it took to produce those bottles of water, they'll still pay that amount. That is your real value, not the cheapest price.
(Score: 3) by bucc5062 on Tuesday March 25 2014, @07:32PM
Okay, but you did not address my first question, how did that price get set? Who set it?
You have a stadium of thirsty people, check
You have a supply of bottled water, check
You need to put up a sign that says "Water for sale, ___ Dollars"
What do I write in?
what ever I feel like? What if your story started with $50 or $100. If he gets no sales how much does he go down to not just start getting sales, but strong sales?
You talk of real value, but you point is still not clear to me. Perhaps the definition of 'real' is the sticky point for my literal brain thinks a real value is that 'raw' cost, the cost it took to get it into the stadium before I put something on the board.
'Faith' value is what I write up on the board with the faith that people will want to buy. 'Faith' value will fluxuate based on demand, supply and what I feel like doing. The raw (real) value should not really change in that stadium.
The more things change, the more they look the same
(Score: 0) by Anonymous Coward on Tuesday March 25 2014, @07:56PM
> What if your story started with $50 or $100. If he gets no sales how much does he go down to not just start getting sales, but strong sales?
I'm not sure why this is such a critical issue or, for that matter, why it is difficult to understand. Where something lands on the supply and demand curve requires testing. His choice could be educated, it could be made up on the spot, it's up to his whim. When the numbers start coming in he adjusts. That's why the buyers set the price and why it doesn't matter what number he puts first.
> 'Faith' value is what I write up on the board with the faith that people will want to buy.
I write 'blibblethorp' up on the board with the hope that people will like my price. Once they start buying I know if I was blibblethorpius. Some variables being random do not a faith-based-system-make, especially when you switch tenses to try to make your point.
(Score: 2) by bucc5062 on Tuesday March 25 2014, @10:04PM
Your a funny guy.
" His choice could be educated, it could be made up on the spot, it's up to his whim. "
Thank you. So a starting price is not made from anything but whimsy. That is why we are so screwed up.
"I write 'blibblethorp' up on the board with the hope that people will like my price. Once they start buying I know if I was blibblethorpius. Some variables being random do not a faith-based-system-make"
REally, we differ on what faith-based is in this regard. I feel that if someone wrote 'blibblethorp' on a board for a price I'd say they are either crazy or wanting to play a game of guess the price.
The more things change, the more they look the same
(Score: 0) by Anonymous Coward on Tuesday March 25 2014, @10:10PM
(Score: 2) by bucc5062 on Wednesday March 26 2014, @10:36AM
If you don't understand, that explains you.
Economics may be discussed in a pure environment separate from morality and ethics, but when practiced, those come into play, or should.
To put it another, it is easier for a camel to pass through the eye of a needle then a rich man to pass through the gates of heaven. Putting value above what is real invites greed which in turn invites power. As a species we have not shown that we handle power well (power corrupts and all). Look about the world, it is not really going well.
That is how the two sentences make sense.
The more things change, the more they look the same
(Score: 0) by Anonymous Coward on Wednesday March 26 2014, @05:21PM
(Score: 2) by bucc5062 on Wednesday March 26 2014, @08:27PM
Somehow I feel we are talking past each other.
You asked how my two sentences went together. I told you why.
As I can tell, there are two values we deal with, real value and faith or relative value. So a minor correction, once a buyer has been found a value has been established. If I give water away has it lost it's 'value'? No, for it still exists, it still provides sustenance. There is a real value to it and by giving it away I am taking on that real value. When I charge a price I set a value that still could be lower then the real value or higher. When it goes above a real value then I am setting a price based on the faith that someone will pay it. When they do I concur a relative value has been established, but that is all it is, relative to what I choose to set. That value is whimsical, it is made up simply because I make a choice. Upstream from me another entity may be doing the same thing, but as I buy from them, they determine my 'real value'. You can take that all the way upstream to pulling material from the ground and making parts.
The underlying point I was trying to get across is that when we value something beyond what it is really worth we create the fertile ground for greed and power. Our valuation, our determination of worth is better served when we do so under the idea of ethics and morality.
The more things change, the more they look the same
(Score: 0) by Anonymous Coward on Wednesday March 26 2014, @09:56PM
All that is fine, but the premise falls apart when the purchase has been made. Nobody will pay more than they want to. I think what's confusing you is that people *wish* things were cheaper but ultimately demand keeps the price up. It is nothing to do with faith or whimsy. That guy selling bottles of water at the stadium, he might be able to charge a hundred, but he will not be able to charge a thousand for exactly that reason.
There are lots of variables, but it is not mysticism.
(Score: 0) by Anonymous Coward on Wednesday March 26 2014, @11:03PM
Hey I owe you an apology. I mistook you for the other guy whose name begins with B, that's why the 'faith-based' question keeps coming up.
That's entirely my fault, I'm sorry.
(Score: 2) by bucc5062 on Friday March 28 2014, @01:07PM
Well thank you and that does explain why we seemed off on understanding. SO to be clear, I'm the smarter B (lol)
The more things change, the more they look the same
(Score: 0) by Anonymous Coward on Saturday March 29 2014, @09:37AM
(Score: 2) by sjames on Tuesday March 25 2014, @09:40PM
To be fair, if it actually barks, it is worth considering that it may be a dog. It could be a seal, but that's not hard to check for. If it is a cat, it is a very sick one and should see the vet right away. Cats actually can't bark.
:-)
(Score: 1) by dougisfunny on Sunday March 30 2014, @06:49PM
Could be a tree ;)
(Score: 2, Insightful) by anubi on Tuesday March 25 2014, @06:48AM
Nowadays people know the price of everything and the value of nothing. [goodreads.com]
I wish I could mod Oscar for that.
"Prove all things; hold fast that which is good." [KJV: I Thessalonians 5:21]