[Shaved Monkey]

The diamonds value is a manufactured monopoly that limits supply to create an illusion of rarity.
It would depend on the level of collapse if you could barter a diamond for a bunch of arugula

[JV153]

I think you are wrong there. When they loan it out for say a car loan it soon comes back into the bank as a deposit from the car dealer. It is 90 % of that deposit that can be reloaned out to somebody else which will also come back to the bank as yet another deposit. So at all times they have deposits equal to 110% of the amount loaned out and reserves of 10 percent (or whatever the law requires today)

Right. Reserves of 10 % (perhaps). So the bank has created money from reserves of 10%.

The money in bank accounts is loaned out perhaps multiple times.. as the case may be. That's why if a certain number of people come to a bank and withdraw their money.. the bank can't honour all the requests. That's why the FDIC (in the case of the United States) only insures a fraction of the value (up to 250,000 USD) of a savings account, checking account, money market account, or certificates of deposit. There isn't any insurance for anything else (stocks, bonds, mutual funds, life insurance policies, annuities or securities).
https://www.fdic.gov/deposit/deposits/

[JV153]

The diamonds value is a manufactured monopoly that limits supply to create an illusion of rarity.
It would depend on the level of collapse if you could barter a diamond for a bunch of arugula

There's are also fancy security devices to make them appear important.. sort of like roped off areas around expensive works of art.

[vtsnowedin]

Meanwhile back at the ranch the stock market has ripped off our retirement funds of 2.3 Trillion dollars sense last May. I suppose you could consider buying stock as loaning money to a corporation with unspecified payback terms and interest rates(dividends). Now when you sell your stock and the loan to the corporation is over does that money cease to exist or do you still have it?
http://www.usatoday.com/story/money/mar ... /78845082/

[Pops]

Didn't need to read it.

Yeah, you do.

To use your terms, "inside" money is the money supply.

No, it isn't.

A distinction is drawn between outside money, which is either of a fiat nature or backed by some asset that is not in zero net supply within the private sector [gold, silver, etc], and inside money, which is an asset backed by any form of private credit that circulates as a medium of exchange.

Quick tip:
Inside money only exists "inside" a bank
Outside money exists even "outside" a bank.

"Outside" money is bank reserves or deposits held on reserve at Federal Reserve banks, and are not part of the money supply.

No.

Outside money includes all cash & coins in circulation (M0) plus vault cash (part of reserve requirement) and reserves held by the Fed. It's reported as MB, Monetary base.

Reserves & vault cash are not counted in the bank money numbers (M-1,2,3,4) because they aren't bank money. They are government money.

The reason to hold government money in reserve is it is a net asset, backed by the government.

Why even have reserves if they were net zero bank money backed by credit?

LOL


A link you won't read...

.

[MonteQuest]

I don't know.. are glitzy trinkets like diamonds paid for with thousands of dollars, or yen, or Euros, etc. also worthless ?

No, but think of the rush to buy tangible assets before the currency becomes worthless. In the US alone there is $60 trillion in debt, but only 1.34 trillion in actual dollars to use to buy "trinkets." The electronic money supply is about $12 trillion. Exit doors get real small in a crowed room.

[Pops]

You are not listening !! All money "IS NOT DEBT. Get it? Your premise is false.

I am afraid you are the one who is not listening. All fiat money is loaned into existence as debt.

Google it. You will not find a link to support your position.

Really?

The first hit...
https://en.wikipedia.org/wiki/Fiat_money

Fiat money has been defined variously as:

Any money declared by a government to be legal tender.[5]
State-issued money which is neither convertible by law to any other thing, nor fixed in value in terms of any objective standard.[6]
Intrinsically valueless money used as money because of government decree.[1]

Fiat money is legal tender because the government says it is.

It can be introduced into the economy either through lending or spending.

Doesn't matter how it gets in though, all that matters is that it has the confidence of the economy and the backing of the government.

[MonteQuest]

The money in bank accounts is loaned out perhaps multiple times.. as the case may be. That's why if a certain number of people come to a bank and withdraw their money.. the bank can't honour all the requests.

Wrong. Existing customer deposits (bank accounts) are not loaned out. Bank reserves in excess of the 10% requirement are loaned out. Bank reserves are not part of the existing money supply. That's why when they are loaned out, new money is created and deposited into customers bank accounts.

Banks can't honor all deposits upon demand because customers deposits in their bank accounts have been invested in assets that are not readily liquid or have become worthless.

[Quinny]

I've read your link Pops.

Can't see your definition of outside and inside money?

Not that I understand why it's relevant either

[Pops]

How could the people with the printing press run out of money?

That's how "the people with the printing press run out of money." It becomes worthless.

I saw that coming, lol

it only "becomes worthless" if you print too much.

[MonteQuest]

To use your terms, "inside" money is the money supply.

No, it isn't.

Yes, it is. You disagree with this?

Inside money is created inside the private sector. Inside money includes bank deposits that exist as a result of the loan creation process (money supply). It is the dominant form of money in the modern economy and as the economy has become increasingly electronic it has taken on an increasingly prominent role in the modern economy. Money is no longer a physical thing, a cash note or a gold bar. Its most common form is now numbers in a computer system.

Outside money is money created outside of the private sector. This includes cash notes and bank reserves. This cash form of money primarily serves for convenience purposes that allows one to draw down a bank account of inside money to make transactions in physical currency. The most important form of outside money is bank reserves or deposits held on reserve at Federal Reserve banks.(not part of the money supply)

Still looking for an answer to my question: If all money is debt, and debt defaults and repayments destroy the money created, what prevents the money supply from going to zero when all debt defaults and/or all debts are paid?

[MonteQuest]

Fiat money is legal tender because the government says it is.

Nothing in your link supports your position. Just because it is legal tender is not relevant to the discussion.

This legal tender is loaned into existence. It has debt attached to it. It is debt-based.

[Pops]

I've read your link Pops.

Can't see your definition of outside and inside money?

Not that I understand why it's relevant either

I'm having a hard time remembering myself, lol

The last link was to the different measures of money supply.

This is the inside/outside paper but the short version is what I posed above.
Outside money (FRNs) are a net asset backed by the government, worth a dollar because Uncle says so.
Inside money has a net value of zero (every "dollar" in your account is balanced by an outstanding bank loan)

If I remember my original comment, as the economy cools post peak, the supply of bank deposits will shrink as bank loans are paid or defaulted on, effectively reducing the "money supply."

My point was originally that this better than a fix amount of currency that would not adjust to a shrinking economy and so be subject to big inflation - lower value.

[MonteQuest]

I've read your link Pops.

Can't see your definition of outside and inside money?

Not that I understand why it's relevant either

That's because it isn't there. And it's not relevant.

[Pops]

Fiat money is legal tender because the government says it is.

Nothing in your link supports your position. Just because it is legal tender is not relevant to the discussion.

This legal tender is loaned into existence. It has debt attached to it. It is debt-based.

A central bank introduces new money into the economy by purchasing financial assets or lending money to financial institutions. Commercial banks then multiply this base money by credit creation through fractional reserve banking, which expands the total supply of broad money

[MonteQuest]

If I remember my original comment, as the economy cools post peak, the supply of bank deposits will shrink as bank loans are paid or defaulted on, effectively reducing the "money supply."

Yes, but let me add a couple of words.

As the economy contracts post peak, the "money supply" will shrink as bank loans are paid or defaulted on, effectively reducing the "money supply" to zero if no new loans are made.

[MonteQuest]

Fiat money is legal tender because the government says it is.

Nothing in your link supports your position. Just because it is legal tender is not relevant to the discussion.

This legal tender is loaned into existence. It has debt attached to it. It is debt-based.

A central bank introduces new money into the economy by purchasing financial assets or lending money to financial institutions. Commercial banks then multiply this base money by credit creation through fractional reserve banking, which expands the total supply of broad money

The FED lending money to banks does not increase the "money supply." The FED purchasing assets, like the FED did buying bad debt bank bonds via QE was a liquidity swap and did not increase the "money supply."

Only the last sentence increases the "money supply".

Google it.

[Pops]

To use your terms, "inside" money is the money supply.

No, it isn't.

Yes, it is. You disagree with this?

Inside money is created inside the private sector. Inside money includes bank deposits that exist as a result of the loan creation process (money supply). It is the dominant form of money in the modern economy and as the economy has become increasingly electronic it has taken on an increasingly prominent role in the modern economy. Money is no longer a physical thing, a cash note or a gold bar. Its most common form is now numbers in a computer system.

Outside money is money created outside of the private sector. This includes cash notes and bank reserves. This cash form of money primarily serves for convenience purposes that allows one to draw down a bank account of inside money to make transactions in physical currency. The most important form of outside money is bank reserves or deposits held on reserve at Federal Reserve banks.(not part of the money supply)

So your contention is M0 is not a part of the money supply?
Why then is it counted in all the measures, M1-4?

Further, since all bank loans have corresponding deposits that offset, if all were zeroed out, your contention is all of today's reserves would disappear somewhere?

Where would they go?


If all loans offset all deposits, what is the offset for stockholder equity?


Where would the vault cash go? counted normally as a part of reserves.


Bank loans and deposits are inside money that have no net value
Reserves and cash are outside money that has a positive net value

--
You keep repeating the bit about all money being debt.

If the dollars in my pocket are debt, who owns them?
Why don't I get a bill in the mail for payment?

[MonteQuest]

Further, since all bank loans have corresponding deposits that offset, if all were zeroed out, your contention is all of today's reserves would disappear somewhere?

Where would they go?

The reserves are not part of the money supply. Just like the stacks of freshly printed FRN's sitting on a loading dock. Printed dollars have no consumer transaction value until they are loaned out into the money supply. Of course, you could steal those dollars off the loading dock and spend them as they are legal tender.

Where would the vault cash go? counted normally as a part of reserves.

It would still be there, but it's "value" would be destroyed.

You keep repeating the bit about all money being debt.

If the dollars in my pocket are debt, who owns them?
Why don't I get a bill in the mail for payment?

Who owns them? Dollar bills are the property of the US govt. The question is who owes the debt attached to them for their existence? Who knows? When the loan was made that created that money, it was a digital entry into that person's bank account. When he withdrew the money in cash, the bank didn't track the serial numbers of the bills.

Why don't you get a bill for those dollars in your pocket? Because you didn't borrow the principle of the loans that created them. You were just paid with a portion of that loan principle. Your money--whether it is in a digital account or physical cash, is someone else's debt. If they default on that debt, your dollar's "value" falls.

Money is debt, whether it is digital or physical in nature.

[MonteQuest]

So your contention is M0 is not a part of the money supply?

M0 is narrow or base money, the physical component of the money supply; the minimum amount necessary to be in circulation in order to facilitate physical money transactions. It is $1.34 trillion. The total US money supply is somewhere around $15 trillion. We don’t know the exact amount anymore because the Federal Reserve stopped publishing that figure in 2006, claiming it was unimportant and “too expensive to tabulate and print.”

Point is, "physical cash" only represents a small portion of the "money supply." And an even smaller portion of the actual debt $60 trillion.

So, when talking of the "money supply," dollar bills just aren't really relevant to the discussion.

Pops, I hope you are reaching an epiphany moment on this. It can be eye opening.