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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: 1) by sce7mjm on Tuesday March 25 2014, @06:31PM
Yes but I don't "like" the deal because I won't make anything from it. Therefore it is perception that I should like the deal more if I get more than what I gave out. Which was my point, money is what it is perceived to be.
I don't have money for a period of time makes me feel like I should have more when I get it back.
If everybody charges an interest rate on loans of a limited resource, the resource COULD run out with debtors unable to recover enough to pay back the initial loan. That is where the system grinds to a halt, unless some higher power comes in to re-organise the debts.
With money, more money can be printed to pay pack certain debts so the system can continue to move, though this has to be done with agreement of powerful parties (ie not individual depositors) to ensure confidence doesn't fall out, runs on banks etc.
Time is a factor of course because if the rates of use of a balance a depositor has made is much less than the pay back time of a loan a bank has made to someone else then the money can continue to flow. The interest that has been paid has come from somewhere potentially out of another loan from another (or the same bank). The lack of money moves around the system a bit like the hole in a semi-conductor, we see the electrons moving about, but the lack of electron exists and has an effect as well. Every so often somebody fills in a hole or two.
I don't pretend to understand the entirety of the system, but having a blinkered view and relying on "The Invisible Hand" to benefit the majority of people seems to me to be a fallacy. If people believe the system works it works better than when people believe the system doesn't work.
Clap three times and say I believe in fairy's.