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posted by LaminatorX on Tuesday March 25 2014, @03:25AM   Printer-friendly

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."

 
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  • (Score: -1) by Anonymous Coward on Tuesday March 25 2014, @06:52PM

    by Anonymous Coward on Tuesday March 25 2014, @06:52PM (#21122)

    > 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.

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  • (Score: 3) by bucc5062 on Tuesday March 25 2014, @07:32PM

    by bucc5062 (699) on Tuesday March 25 2014, @07:32PM (#21146)

    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

      by Anonymous Coward on Tuesday March 25 2014, @07:56PM (#21157)

      > 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

        by bucc5062 (699) on Tuesday March 25 2014, @10:04PM (#21207)

        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

          by Anonymous Coward on Tuesday March 25 2014, @10:10PM (#21210)
          > Thank you. So a starting price is not made from anything but whimsy. That is why we are so screwed up. Since the price is adjusted by actual demand, how does the first sentence connect to the second?
          • (Score: 2) by bucc5062 on Wednesday March 26 2014, @10:36AM

            by bucc5062 (699) on Wednesday March 26 2014, @10:36AM (#21427)

            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

              by Anonymous Coward on Wednesday March 26 2014, @05:21PM (#21606)
              What does that have to do with it being a faith based system? Ethically or not, once a buyer has been found, the value has been established. Jerkiness does not mean: 'made up'
              • (Score: 2) by bucc5062 on Wednesday March 26 2014, @08:27PM

                by bucc5062 (699) on Wednesday March 26 2014, @08:27PM (#21731)

                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

                  by Anonymous Coward on Wednesday March 26 2014, @09:56PM (#21772)

                  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

                  by Anonymous Coward on Wednesday March 26 2014, @11:03PM (#21795)

                  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

                    by bucc5062 (699) on Friday March 28 2014, @01:07PM (#22485)

                    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

                      by Anonymous Coward on Saturday March 29 2014, @09:37AM (#22857)
                      Haha! Have a good weekend.