Mar 192014
 
 March 19, 2014  Posted by at 3:38 pm Finance Tagged with: , , ,
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Marion Post Wolcott Man washing car at Sarasota, Florida, trailer park January 1941

There will be many people who don’t care, there will be many more who don’t understand, and there will be boatloads who refuse to believe it’s true, but it still is. The Bank of England, in one single document, discredited, just at first count, 1) the majority of economics textbooks, 2) vast swaths of the entire field of economics, run as it is by economists educated by those same textbooks, 3) most governments’ economic policies, designed by these economists, 4) much of its own work, also designed by the same economists, 5) Paul Krugman and 6) the “committee” that hands Krugman and his ilk their Not-So-Nobel Prizes.

Indeed, the message the Bank’s people send is so devastating to economics as it is taught today that their document will most likely simply be ignored, even though that probably shouldn’t really be possible with an official central bank report. As my friend Steve Keen, whose take on this I touched on yesterday, put it:

Now if I believed in the tooth fairy, I would hope this emphatic denunciation of the textbook model would cause macroeconomics lecturers to drastically revise their lectures for next week. But I’m too long in the tooth to have such a delusion. They’ll ignore it instead.

Their dominant “tactic” — if I can call it that — will be ignorance itself: most economics lecturers won’t even know that the bank’s paper exists, and they will continue to teach from whatever textbook bible they’ve chosen to inflict upon their students. A secondary one will be to know of it, but ignore it, as they’ve ignored countless critiques of mainstream economics before. The third arrow in the quill, if they are challenged by students about it (hint hint!), will be to argue that the textbook story is a “useful parable” for beginning students, and a more realistic vision is introduced in more advanced courses.

Still, to see the Bank of England admit that the entire model most governments, including that of England, use to conduct policies, including austerity, should really be thrown out the window, is noteworthy.

Michael McLeay, Amar Radia and Ryland Thomas of the Bank’s Monetary Analysis Directorate published in the Quarterly Bulletin 2014 Q1 a document entitled Money Creation in the Modern Economy, and introductory document, Money in the Modern Economy: An Introduction, and two videos that unfortunately seem shot with the express intent of losing the viewer’s interest within 10 seconds, but are still worth watching.

The authors’ opening statements are:

• This article explains how the majority of money in the modern economy is created by commercial banks making loans.

• Money creation in practice differs from some popular misconceptions — banks do not act simply as intermediaries, lending out deposits that savers place with them, and nor do they ‘multiply up’ central bank money to create new loans and deposits.

• The amount of money created in the economy ultimately depends on the monetary policy of the central bank. In normal times, this is carried out by setting interest rates. The central bank can also affect the amount of money directly through purchasing assets or ‘quantitative easing’.

Where they say “banks do not act simply as intermediaries”, they do away in one fell swoop with Paul Krugman, who in his discussions with Steve Keen has always maintained just that: banks are mere intermediaries. Instead, Steve’s argument that banks create money, an argument ridiculed by Krugman, is now confirmed by the BoE. We await Krugman’s reaction.

Since I have two very good interpretations of the BoE document that I think you should read, and they’re long enough as they are, I’m not going to try and add a third one myself. I suggest you first try and stomach and process Steve Keen, plus David Graeber’s take as the Guardian published it. One thing: this confirms what most people already know, though most have never defined it as such. That makes it all the more peculiar that economists are not educated that way, and that economic policies are based on their recommendations.

Here’s Dave Graeber:

The Truth Is Out: Money Is Just An IOU, And The Banks Are Rolling In It

The Bank of England’s dose of honesty throws the theoretical basis for austerity out the window

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.

To get a sense of how radical the Bank’s new position is, consider the conventional view, which continues to be the basis of all respectable debate on public policy. People put their money in banks. Banks then lend that money out at interest – either to consumers, or to entrepreneurs willing to invest it in some profitable enterprise. True, the fractional reserve system does allow banks to lend out considerably more than they hold in reserve, and true, if savings don’t suffice, private banks can seek to borrow more from the central bank.

The central bank can print as much money as it wishes. But it is also careful not to print too much. In fact, we are often told this is why independent central banks exist in the first place. If governments could print money themselves, they would surely put out too much of it, and the resulting inflation would throw the economy into chaos. Institutions such as the Bank of England or US Federal Reserve were created to carefully regulate the money supply to prevent inflation. This is why they are forbidden to directly fund the government, say, by buying treasury bonds, but instead fund private economic activity that the government merely taxes.

It’s this understanding that allows us to continue to talk about money as if it were a limited resource like bauxite or petroleum, to say “there’s just not enough money” to fund social programmes, to speak of the immorality of government debt or of public spending “crowding out” the private sector. What the Bank of England admitted this week is that none of this is really true.

To quote from its own initial summary: “Rather than banks receiving deposits when households save and then lending them out, bank lending creates deposits” … “In normal times, the central bank does not fix the amount of money in circulation, nor is central bank money ‘multiplied up’ into more loans and deposits.”

In other words, everything we know is not just wrong – it’s backwards. When banks make loans, they create money. This is because money is really just an IOU. The role of the central bank is to preside over a legal order that effectively grants banks the exclusive right to create IOUs of a certain kind, ones that the government will recognise as legal tender by its willingness to accept them in payment of taxes. There’s really no limit on how much banks could create, provided they can find someone willing to borrow it.

They will never get caught short, for the simple reason that borrowers do not, generally speaking, take the cash and put it under their mattresses; ultimately, any money a bank loans out will just end up back in some bank again. So for the banking system as a whole, every loan just becomes another deposit. What’s more, insofar as banks do need to acquire funds from the central bank, they can borrow as much as they like; all the latter really does is set the rate of interest, the cost of money, not its quantity. Since the beginning of the recession, the US and British central banks have reduced that cost to almost nothing. In fact, with “quantitative easing” they’ve been effectively pumping as much money as they can into the banks, without producing any inflationary effects.

What this means is that the real limit on the amount of money in circulation is not how much the central bank is willing to lend, but how much government, firms, and ordinary citizens, are willing to borrow. Government spending is the main driver in all this (and the paper does admit, if you read it carefully, that the central bank does fund the government after all). So there’s no question of public spending “crowding out” private investment. It’s exactly the opposite.

Why did the Bank of England suddenly admit all this? Well, one reason is because it’s obviously true. The Bank’s job is to actually run the system, and of late, the system has not been running especially well. It’s possible that it decided that maintaining the fantasy-land version of economics that has proved so convenient to the rich is simply a luxury it can no longer afford.

But politically, this is taking an enormous risk. Just consider what might happen if mortgage holders realised the money the bank lent them is not, really, the life savings of some thrifty pensioner, but something the bank just whisked into existence through its possession of a magic wand which we, the public, handed over to it.

Historically, the Bank of England has tended to be a bellwether, staking out seeming radical positions that ultimately become new orthodoxies. If that’s what’s happening here, we might soon be in a position to learn if Henry Ford was right.

And Steve Keen:

The BoE’s Sharp Shock To Monetary Illusions

A couple of weeks ago I took a swipe at Bank of England over a speech by its Governor Mark Carney that was unrealistic about the dangers of a bloated financial sector (Godzilla is good for you? March 3). Today I’m doing the opposite: I’m doffing my cap to the researchers at Threadneedle Street for a new paper “Money creation in the modern economy,” which gives a truly realistic explanation of how money is created, why this really matters, and why virtually everything that economic textbooks say about money is wrong.

The bank is going gangbusters to get its message across, with an introductory paper on what money is, and two short videos on what money is and money creation, both shot in its gold vault. It clearly wants economic textbooks to throw out the neat, plausible but wrong rubbish they currently teach about money, and connect with the real world instead.

Economic textbooks teach students that money creation is a two-stage process. At the start, banks can’t lend because of a rule called the “Required Reserve Ratio” that specifies a ratio between their deposits and their reserves. If they’re required to hold 10 cents in reserves to back every dollar in deposits, then if deposits are $10 trillion and reserves are $1 trillion, the banking sector can’t lend any money to anyone.

Stage one in the textbook money creation model is that the Fed (or the Bank of England) gives the banks additional reserves — say $100 billion worth. Then in stage two, the banks lend this to their customers, who then deposit it right back into banks, who hang on to 10% of it ($10 billion) and lend the remaining $90 billion out again. This process iterates until an additional $1 trillion of deposits are created, so that the reserve ratio is restored ($1.1 trillion in reserves, $11 trillion in deposits).

That model goes by the name of “Fractional Reserve Banking” (aka the “Money Multiplier”), and depending on your political persuasion it’s either outright fraud (If you’re of an Austrian persuasion like my mate Mish Shedlock) or just the way things are if you’re a mainstream economist like Paul Krugman. In the latter case, it lets conventional economists build models of the economy that completely ignore the existence of banks, and private debt, and in which the money supply is completely controlled by the Fed.

In this new paper, the Bank of England states emphatically that “Fractional Reserve Banking” is neither fraud, nor the way things are, but a myth — and it rightly blames economic textbooks for perpetuating it. The paper doesn’t beat about the bush when it comes to the divergence between reality and what economic textbooks spout. In fact, as the paper explains it:

• Rather than banks receiving deposits when households save and then lending them out, bank lending creates deposits. (p. 1)

• In normal times, the central bank does not fix the amount of money in circulation, nor is central bank money ‘multiplied up’ into more loans and deposits… (p. 1)

  • Rather than banks lending out deposits that are placed with them, the act of lending creates deposits — the reverse of the sequence typically described in textbooks… (p. 2)
  • While the money multiplier theory can be a useful way of introducing money and banking in economic textbooks, it is not an accurate description of how money is created in reality… (p. 2)
  • As with the relationship between deposits and loans, the relationship between reserves and loans typically operates in the reverse way to that described in some economics textbooks. (p. 2)

Now if I believed in the tooth fairy, I would hope this emphatic denunciation of the textbook model would cause macroeconomics lecturers to drastically revise their lectures for next week. But I’m too long in the tooth to have such a delusion. They’ll ignore it instead.

Their dominant “tactic” — if I can call it that — will be ignorance itself: most economics lecturers won’t even know that the bank’s paper exists, and they will continue to teach from whatever textbook bible they’ve chosen to inflict upon their students. A secondary one will be to know of it, but ignore it, as they’ve ignored countless critiques of mainstream economics before. The third arrow in the quill, if they are challenged by students about it (hint hint!), will be to argue that the textbook story is a “useful parable” for beginning students, and a more realistic vision is introduced in more advanced courses.

Here the Bank of England has unfortunately given them a useful “out”, by politely pretending that the money multiplier model “can be a useful way of introducing money and banking”. But of course this feint will be pure malarkey. Firstly, the model is utterly misleading — it’s about as useful an introduction to the nature of money and banking as the Book of Genesis is an introduction to the theory of evolution. Once people believe the money multiplier model, they can rarely get their heads around the reality that bank lending creates money, and that this has drastic effects on the level of economic activity.

Secondly, the undergraduate lecturer’s “it gets better higher up” line is a ruse. Masters and PhD level courses continue to ignore banks, and though mainstream modellers are introducing all sorts of “financial frictions” into their DSGE models (as Noah Smith pointed out recently), none of them — with the sterling exception of Michael Kumhof of the IMF — are actually incorporating banks and their capacity to both create and destroy money into their models.

Why? Because if you admit the reality that banks create money by lending, and that money is destroyed by debt repayment (a point I have to admit that I took some time to appreciate), all the simple equilibrium parables of conventional economics fly out the window. In particular, the level of economic activity now depends on the lending decisions of banks (and the repayment decisions of borrowers). If banks lend more rapidly, or if borrowers repay more slowly, there will be a boom; if the reverse, there will be a slump. As the Bank of England puts it, if new loans simply make up for old ones being repaid, then there is no effect, but if new loans exceed repayment then aggregate demand will increase.

“There are two main possibilities for what could happen to newly created deposits,” the bank says. “First, as suggested by Tobin, the money may quickly be destroyed if the households or companies receiving the money after the loan is spent wish to use it to repay their own outstanding bank loans…

“The second possible outcome is that the extra money creation by banks can lead to more spending in the economy (p. 7).”

So from a realistic, hands-on perspective, the Bank of England declares that money matters in macroeconomics because it affects the level of economic activity. This really shouldn’t be a big deal — it’s what most people actually believe anyway — but incredibly, mainstream economics pretends that money only affects prices, that it has no impact (or only temporary one) on real activity, and that monetary disturbances are all the fault of the government (read central bank) anyway, because a quintessential market institution like a bank couldn’t do anything wrong, could it?

Leading economists can’t just ignore this paper, or blithely dismiss it as the foot-soldiers of the profession will do. But I seriously doubt that they will let it challenge their current position.

I will in particular be curious to see whether Paul Krugman notes this paper, and how he reacts to it. Krugman has been the most visible and aggressive defender of the proposition that banks don’t matter, with this including throwing a haymaker at me for making the case that the Bank of England is now making.

“In particular, he [Keen] asserts that putting banks in the story is essential,” Krugman wrote in 2012. “Now, I'm all for including the banking sector in stories where it's relevant; but why is it so crucial to a story about debt and leverage?

“Keen says that it's because once you include banks, lending increases the money supply. OK, but why does that matter? He seems to assume that aggregate demand can't increase unless the money supply rises, but that's only true if the velocity of money is fixed; so have we suddenly become strict monetarists while I wasn't looking? In the kind of model Gauti and I use, lending very much can and does increase aggregate demand, so what is the problem?”

Since then Krugman has continued to press the belief that banks are “mere intermediaries” in lending, that they can be ignored in macroeconomics.

“Yes, commercial banks, unlike other financial intermediaries, can make a loan simply by crediting the borrower with new deposits, but there’s no guarantee that the funds stay there,” he said in the article Commercial Banks As Creators of “Money”.

And in the same piece he wrote: “Banks are just another kind of financial intermediary, and the size of the banking sector — and hence the quantity of outside money — is determined by the same kinds of considerations that determine the size of, say, the mutual fund industry.”

Now that he has been directly contradicted on these points, not by some Antipodean heterodox economist, but by Threadneedle Street itself, I expect Krugman’s riposte will be the KISS principle: that while the “loans create deposits” argument is technically true, it doesn’t make any real difference to macroeconomics.

After all, Krugman certainly can’t just dismiss the Bank of England as being staffed by “Banking Mystics”, as he has brushed off the contrary views of others.

Home Forums The Bank of England Lights A Fuse Under the Field of Economics

This topic contains 20 replies, has 10 voices, and was last updated by  Marc Gauvin 7 months, 2 weeks ago.

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March 19, 2014 at 3:38 pm #11853

Raúl Ilargi Meijer

Marion Post Wolcott Man washing car at Sarasota, Florida, trailer park January 1941 There will be many people who don’t care, there will be many more
[See the full post at: The Bank of England Lights A Fuse Under the Field of Economics]

March 19, 2014 at 4:45 pm #11854

Professorlocknload

Dang.
Banks bending Austrian, and now this?

http://www.yumasun.com/news/ariz-voters-abandoning-the-major-political-parties/article_dc418044-ae5c-11e3-ac0e-0017a43b2370.html

Sea Change?

March 19, 2014 at 5:15 pm #11855

Professorlocknload

Ever wonder what would happen if Banks were cut loose from all State control, protection and regulation, and were forced to perform for their customers for a living? And if they didn’t, their customers would simply vote with their feet, and leave ‘em destitute?

Ah, but that would require honest money. Money uncontrolled by politics. Money that would retain it’s value in the hands of the people. Money the Banks would need to compete with each other to be entrusted with. Money, in order to be entrusted with, governments would need to actually perform.

It will happen with or without the blessing of TPTB. The more obstructions erected against grass roots shadow economic activity, the harder they clamp down, the more of it will necessarily occur.

I can only imagine the subsystems cropping up in places like Argentina and Venezuela as authority continues it’s assault on economic freedom of choice.

Not hard though, after experience in a war torn nation, witnessing street exchange rates established between local currencies, gold, the dollar and military payment certificates. The “official” window resembled the Maytag repairman’s office, and with the street vender, one might have had to take a number.

March 19, 2014 at 6:25 pm #11856

jal

The BoE has more authority then me.
BUT … like you said nobody will pay any attention.

I got to repeat what was said.

<b>”In other words, everything we know is not just wrong – it’s backwards. When banks make loans, they create money. This is because money is really just an IOU. The role of the central bank is to preside over a legal order that effectively grants banks the exclusive right to create IOUs of a certain kind, ones that the government will recognize as legal tender by its willingness to accept them in payment of taxes. There’s really no limit on how much banks could create, provided they can find someone willing to borrow it.
Just consider what might happen if mortgage holders realized the money the bank lent them is not, really, the life savings of some thrifty pensioner, but something the bank just whisked into existence through its possession of a magic wand which we, the public, handed over to it.”</b>

March 19, 2014 at 6:33 pm #11857

Ken Barrows

I don’t know if Graeber’s argument that the BofE paper destroys the theoretical basis for austerity holds water. Finite resources (or how finite) will determine if austerity rules the day. Does Graeber think that more borrowing is the answer to the world’s problems?

Monetary policy just shifts around the claims on wealth/real resources. Current monetary policy shifts the claims upward and imposes austerity on the masses.

March 20, 2014 at 11:16 am #11864

Charles Alban

this issue has been covered in a number of videos and books. i think the important point is that if the creation of debt and thus the creation of the money supply were the responsibility of the government instead of privately owned banks, the national debt would be wiped out and income tax could be eliminated since the cost of operating the government could be met by interest on the loaned money. the only purpose of income tax is to pay interest to the bankers.

the US government very successfully issued its own money both during the revolutionary war and the civil war, and it was not inflationary.

also, i believe somebody said it would be possible to give everybody on the planet a cash stipend whether or not they “worked” for it simply by computer entries, if the governments issued the “money.”

March 20, 2014 at 2:26 pm #11865

Vitalstatistix

Money created through loans by the government is not more or less inflationary than money created by banks through loans. The main difference is that the interest charged on these loans are siphoned off into the pockets of bankers. Bankers really don’t contribute much (I am tempted to say nothing) to the economy. It is the surest way to make money. If it does not work, government will bail you out. We have seen the model during the 2008 bailout. Profits are privatised while losses are socialised. This exploits ordinary citizens and benefit bankers. Governments could have used this money to reduce taxes. Suggestion to voters: Only vote for a party that vows to eliminate private banks under the current economic model of central banks. Am I missing something?

March 20, 2014 at 2:38 pm #11866

Raúl Ilargi Meijer

Only vote for a party that vows to eliminate private banks under the current economic model of central banks. Am I missing something?

Yeah, there are no such parties anywhere. Beppe Grillo probably comes closest.

Also, banks don’t only not contribute much, they suck away a very substantial part of the value of real production in an economy.

March 20, 2014 at 9:49 pm #11874

Vitalstatistix

Sure, there are no such parties, but the self interest of voters should ensure that they enjoy large support when started. That very fact should be enough incentive to start these parties. With the internet, it should be relatively easy to spread the word.

I don’t follow Italian politics. I have thouroughly enjoyed some of Grillo’s speeches, but what has he (the 5* movement) accomplished since elections were held? Is the movement still growing in popularity?

I think most people are aware that the bigger the FIRE economy, the more the real economy suffers.

I listened to an interview Nicole did with JHK. In the light of the bank bailouts, was she not too soft on Obama?

March 21, 2014 at 7:09 am #11881

OscarK

It’s a big thing that a central bank publishes the true description of how money is created. The Swedish central bank, Riksbanken, did that in June 2013 by including a chapter on creating money in their annual publication The Swedish Financial Market 2013. See pages 74 – 77. http://www.riksbank.se/Documents/Rapporter/Finansmarknaden/2013/rap_finansm_130830_eng.pdf

March 21, 2014 at 7:45 am #11882

OscarK

Why did Riksbanken and the Bank of England do this? I know that Riksbanken over the last years have got an increasing number of questions from the public who obviously know how money is created. Since the central bank is dependent on being trustworthy in the eyes of the public, they have reached a point where they needed to act. This action, however, means that the risk of loosing public trust is transferred to the politicians. So now they have the ball.

  • This reply was modified 8 months ago by  OscarK.
March 21, 2014 at 3:39 pm #11891

zaphod42

You bring in many thoughts. Freeform, let me consider:

If the government ‘prints’ the money and lends it, does it follow that government payroll, purchases and the like are then done by direct payment of ‘new’ money? Don’t get me wrong, I think that’s a good thing. If payments exceed receipts (of the interest earned on ‘loans’ made to businesses and individuals), there would be an inflationary ‘tax’ that would be quite rational and equitible. The pressure from this might result in lowered government expense as folks figure it out. Hopefully.

Furthermore, from an inflationary standpoint, what difference does it make whether the government prints the money into existence or borrows it into existence, other than eliminating interest expense?

Overall, I say good on the Bank of England… God save the Queen and all that rot!

Craig

March 21, 2014 at 6:43 pm #11904

Marc Gauvin

Yet they still get it 100% wrong. We all knew this decades ago, no one listened then, will they now?

http://bibocurrency.com/index.php/downloads-2/19-english-root/learn/180-bank-of-england-economists-evidence-absurdity-of-modern-money-contracts

  • This reply was modified 8 months ago by  Marc Gauvin.
March 21, 2014 at 7:09 pm #11906

zaphod42

Yes… the book, “Overshoot” was published (by Univ. of Illinois) in 1982. 1982, FOR GOD’S SAKE!!!

It could have been written yesterday. And yet… and yet… it is as if nothing was said.

Very discouraging, if you ask me.

Craig

March 21, 2014 at 8:25 pm #11908

OscarK

Deutsche Bundesbank was first. This is published in 2009: http://www.bundesbank.de/Redaktion/DE/Downloads/Service/Schule_und_Bildung/geld_und_geldpolitik_kapitel_3.pdf?__blob=publicationFile.
See page 70 “Geldschöpfung”

March 21, 2014 at 10:22 pm #11910

Marc Gauvin

Come on, we don’t need anyone to tell it to us, it is basic logic. My book “The Money PSYOP” shows that it can’t be any other way, money can only be created as a measure of value it cannot be the value it measures.

http://bibocurrency.com/index.php/money-psyop-2

Graham Towers former Governor of The Bank of Canada said it in 1939

http://www.publications.parliament.uk/pa/jt201213/jtselect/jtpcbs/98/98vw36.htm

The multiplier is impossible without money being created and that has been taught for years. But that is neither here nor there, as my article posted above in my previous post says, the real point is that money is not value it is only a record of value. So money contracts cannot be valid if conceived with a definition that confuses value with the record of value. If I owe a kilo of flour do I owe a kilo or do I owe flour? See:

http://bibocurrency.com/index.php/downloads-2/19-english-root/learn/174-a-legal-approach-to-cancelling-all-current-money-contracts

  • This reply was modified 8 months ago by  Marc Gauvin.
March 22, 2014 at 3:20 am #11912

OscarK

I am not arguing with you, Marc. My argument is that several central banks obviously have felt the need to declare what they know as a fact in a world full of neoclassic people like Krugman. Too many ordinary people understand how money is created and they will loose their trust in central banks that plays along with the Krugmans. Loosing public trust is a price that a central bank cannot afford.

March 22, 2014 at 10:37 am #11914

Marc Gauvin

HI Oscar,

My apologies I didn’t mean to imply an argument. I am just hoping that after so much effort on the part of those of us that have gone counter the status quo’s assumed beliefs, we can start to have confidence in numbers to put an end to the money mind trap. Because of its importance as a sort of mass cult religion that has managed to subdue humanity so profoundly, we must on mass but on purely rational and objective grounds, completely debunk the current paradigm. The rational approach is in our favour in terms of making both present and future better and healthier.

http://bibocurrency.com/index.php/downloads-2/19-english-root/learn/175-a-wake-up-call-for-those-who-claim-to-care-2

Thanks for your comments and this blog,

Marc

  • This reply was modified 8 months ago by  Marc Gauvin.
March 22, 2014 at 12:31 pm #11919

Marc Gauvin

if money is property then it can be lent, borrowed, sold and rented. The question then is if money “IS” an object of property/value subject to “supply”. It turns out that such a notion is “THE” underlying double think. Interest on money is justified by that false notion and even if prohibited, as long as people believe money IS an object of value, interest will be charged whether legally or not.

http://bibocurrency.com/index.php/downloads-2/19-english-root/learn/166-money-measure-vs-money-property

March 28, 2014 at 3:59 pm #12000

sixhonestservingmen

The bankers and those who are their proxies by default, as a consequence of failing to pay attention to the facts, rather than going on to utter and repeat absolute gibberish about IOU’s and other ridiculous senseless nonsense, will forever confuse the issue if we are not alert to the truth. Clearly, an example of the gibberish referred to, is the article cited, by David Graeber of the Guardian, when he writes of the recent disclosure by the Bank of England of its mechanism of money creation. The article he writes by no means remotely touches on the truth. We need not spend long to discover the answer as to why, except to say we need only compare his musings with the simple explanation presented here -

THERE IS NO DEBT ITS JUST YOUR IMAGININGS

http://thereisnodebt.wordpress.com/2013/02/26/there-is-no-debt-its-just-your-imaginings-2/

April 8, 2014 at 1:06 pm #12205

Marc Gauvin

Agreed!

Logically it is only possible to “owe” the value of real goods and services, money at best is a record of that value never a substitute of it. That is the essence of our thesis too.

Love to talk about it if you like send me a mail to info@bibocurrency.com.

Great work!

Marc

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