Positive Money - Cranks?

Explore the business, economy, finance and trade aspects of human society.

Moderators: Calilasseia, ADParker

Re: Positive Money - Cranks?

#41  Postby UndercoverElephant » Feb 21, 2014 6:32 pm

Panderos wrote:I've been meaning to make a post about these guys since reading this thread last year.
http://www.rationalskepticism.org/news- ... 31210.html

Positive Money believe commercial banks create money from thin air and as a result force the whole world into some kind of inescapable debt-slavery.



http://www.positivemoney.org/

Does anyone here understand (central) banking enough to explain if this is accurate or not? My crank detector is bleeping, but I don't really know enough about this to say for sure.


PositiveMoney are absolutely NOT cranks. Your detector is bleeping merely because this is so damned outrageous. A lot of people have trouble believing it when they first hear about it, but that doesn't mean it is not true. Also, certainly people who think they understand it, because they were taught something different at university, have a particular problem coming to terms with it, because they have to accept they've been led astray by people who were supposed to know better.


Note: The internet is full of people who claim to understand just how banking works. If anyone here is going to make such a claim, at least give me a reason to believe you.


I'm asking you to believe the ex-governor of the bank of England, and his deputy. Why would you believe Blackadder over Mervyn King??
UndercoverElephant
 
Posts: 6617
Age: 48
Male

Country: UK
United Kingdom (uk)
Print view this post

Ads by Google


Re: Positive Money - Cranks?

#42  Postby UndercoverElephant » Feb 21, 2014 6:33 pm

UtilityMonster wrote:I know a guy who buys this nonsense. Banks engage in a process known as fractional reserve lending whereby they take in deposits and lend it out to other people. Those individuals who borrow the money typically put it in a bank while they wait to use it, and the bank they give it to then proceeds to lend that money out, and on and on it goes.


Wrong. Widely peddled mythology, but mythology it is.


Now, it strikes me as utterly bizarre that anyone freaks out over this.


You've failed to grasp what they are freaking out over.
UndercoverElephant
 
Posts: 6617
Age: 48
Male

Country: UK
United Kingdom (uk)
Print view this post

Re: Positive Money - Cranks?

#43  Postby UndercoverElephant » Feb 21, 2014 6:37 pm

Panderos wrote:Personally I suspect the video is wrong and the banks have to borrow from the Central Bank in order to do this.


Nope. Under a fractional reserve system the bank borrows £10 from the Central Bank and it can then lend out £90 in loans. But in the UK, we don't even have a fractional reserve system anymore. It's voluntary. The bank can in fact lend out however much money it wants, just by creating it.


But this still raises the question, if banks can borrow from a central bank why do they need depositors?


Because they can use the money deposited to invest and make even more money. Banks can create money out of thin air for loaning to people, but if they want to do anything else with money then they either have to borrow it from the central bank or, preferably, get it from depositors.
Last edited by UndercoverElephant on Feb 21, 2014 11:34 pm, edited 1 time in total.
UndercoverElephant
 
Posts: 6617
Age: 48
Male

Country: UK
United Kingdom (uk)
Print view this post

Re: Positive Money - Cranks?

#44  Postby UndercoverElephant » Feb 21, 2014 6:40 pm

Blackadder wrote:Oh dear. Where to begin?


How about going away and doing some research before you lecture other people?


Just to simplify, commercial banks cannot really create new money our of thin air.


How about some proof instead of just assertions?
UndercoverElephant
 
Posts: 6617
Age: 48
Male

Country: UK
United Kingdom (uk)
Print view this post

Re: Positive Money - Cranks?

#45  Postby Panderos » Feb 21, 2014 6:48 pm

For now I'm just going to let this debate play out and see who I'm convinced by.
"A witty saying proves nothing." - Voltaire
User avatar
Panderos
THREAD STARTER
 
Posts: 2971

United Kingdom (uk)
Print view this post

Re: Positive Money - Cranks?

#46  Postby VazScep » Feb 21, 2014 6:57 pm

I think I get it, so I'll go ahead and state it this way: when you deposit money in a bank, you are a creditor. The bank is a debtor; it owes you the amount you deposited. Normally, the Bank should fill out its balance sheet to reflect this, and your deposit should go down as a liability. But instead, the bank puts the deposit down as an asset.

I haven't been convinced this is a bad thing, but I can't pretend I really understand it. The Money as debt film says the problem is this: most of the money in circulation is bank loans. Bank loans are paid with interest. Therefore the economy is required to grow or there will inevitably defaults and foreclosures. I'm not sure if that's a problem in practice, but I think the video was also trying to tie the desire for perpetual growth with the realities of finite resources, and saying we were going to fuck ourselves over that way.

It does strike me as weird that 0% growth, which would intuitively mean stability, should be such a bad thing for our economy. Maybe this is the reason.
Here we go again. First, we discover recursion.
VazScep
 
Posts: 3758

United Kingdom (uk)
Print view this post

Re: Positive Money - Cranks?

#47  Postby UndercoverElephant » Feb 21, 2014 7:23 pm

VazScep wrote:I think I get it, so I'll go ahead and state it this way: when you deposit money in a bank, you are a creditor. The bank is a debtor; it owes you the amount you deposited. Normally, the Bank should fill out its balance sheet to reflect this, and your deposit should go down as a liability. But instead, the bank puts the deposit down as an asset.

I haven't been convinced this is a bad thing, but I can't pretend I really understand it. The Money as debt film says the problem is this: most of the money in circulation is bank loans. Bank loans are paid with interest. Therefore the economy is required to grow or there will inevitably defaults and foreclosures. I'm not sure if that's a problem in practice, but I think the video was also trying to tie the desire for perpetual growth with the realities of finite resources, and saying we were going to fuck ourselves over that way.

It does strike me as weird that 0% growth, which would intuitively mean stability, should be such a bad thing for our economy. Maybe this is the reason.


Hi Vazscep.

You're making some interesting points which aren't directly about whether or not PositiveMoney are cranks. I agree with you that 0% growth is required for stability, which is inevitably required given that we live on a finite planet with finite resources. However, this leads to a very complex discussion which is a bit of a derail from the main thrust of this thread (although just as important).


I think I get it, so I'll go ahead and state it this way: when you deposit money in a bank, you are a creditor. The bank is a debtor; it owes you the amount you deposited. Normally, the Bank should fill out its balance sheet to reflect this, and your deposit should go down as a liability. But instead, the bank puts the deposit down as an asset.


No. Banks treat loans as assets. The deposit is just money that has been deposited, which it is free to do whatever it wants with. This is a liability, rather than a debt. The bank is liable to pay you back the money.
UndercoverElephant
 
Posts: 6617
Age: 48
Male

Country: UK
United Kingdom (uk)
Print view this post

Ads by Google


Re: Positive Money - Cranks?

#48  Postby VazScep » Feb 21, 2014 7:34 pm

UndercoverElephant wrote:No. Banks treat loans as assets. The deposit is just money that has been deposited, which it is free to do whatever it wants with. This is a liability, rather than a debt. The bank is liable to pay you back the money.
Well, I was hoping there was something useful to phrasing it this way, but I'll defer to you on that one. Cheers!
Here we go again. First, we discover recursion.
VazScep
 
Posts: 3758

United Kingdom (uk)
Print view this post

Re: Positive Money - Cranks?

#49  Postby Panderos » Feb 21, 2014 8:23 pm

I'd be careful about deferring to anyone on this issue to be honest. If you go back to the previous page of this thread you'll see a link GT221 posted to a debate about how banks work - a debate between two professional economists. How can professional economists be debating about what are pretty much the basics of banking?
"A witty saying proves nothing." - Voltaire
User avatar
Panderos
THREAD STARTER
 
Posts: 2971

United Kingdom (uk)
Print view this post

Re: Positive Money - Cranks?

#50  Postby VazScep » Feb 21, 2014 8:36 pm

Panderos wrote:I'd be careful about deferring to anyone on this issue to be honest.
I can at least not going trying to explain fractional reserve banking by talking about assets and liabilities until I know better. If economists are collectively clueless, I should probably take extra pains to keep stum.
Here we go again. First, we discover recursion.
VazScep
 
Posts: 3758

United Kingdom (uk)
Print view this post

Re: Positive Money - Cranks?

#51  Postby Panderos » Feb 21, 2014 8:55 pm

Well you're not the first, as you'll see if you check my posting history ...

I thought I had it sussed apart from one thing I couldn't quite figure out, but now both UE and Blackadder say I have it wrong. Which wouldn't be so bad if they actually agreed about how.

What's crazy is that banking is something built and controlled by humans. How it works shouldn't be a mystery, especially to professional economists.
"A witty saying proves nothing." - Voltaire
User avatar
Panderos
THREAD STARTER
 
Posts: 2971

United Kingdom (uk)
Print view this post

Re: Positive Money - Cranks?

#52  Postby VazScep » Feb 21, 2014 9:05 pm

Panderos wrote:Well you're not the first, as you'll see if you check my posting history ...

I thought I had it sussed apart from one thing I couldn't quite figure out, but now both UE and Blackadder say I have it wrong. Which wouldn't be so bad if they actually agreed about how.

What's crazy is that banking is something built and controlled by humans. How it works shouldn't be a mystery, especially to professional economists.
The bees might not realise they are building a hive. The existence of this sort of mystery doesn't seem like, well, a mystery to me. I don't think we're controlling it from above, and even when it comes to codifying the laws surrounding banking, you'll have to somehow isolate the pressures of vested interests on the legisature. This mess goes way back, with unforeseen consequences all the way. That, at least, was the story about the rise of this sort of bank loan: people started trading their deposit receipts.
Here we go again. First, we discover recursion.
VazScep
 
Posts: 3758

United Kingdom (uk)
Print view this post

Re: Positive Money - Cranks?

#53  Postby UndercoverElephant » Feb 21, 2014 9:31 pm

Panderos wrote:I'd be careful about deferring to anyone on this issue to be honest. If you go back to the previous page of this thread you'll see a link GT221 posted to a debate about how banks work - a debate between two professional economists. How can professional economists be debating about what are pretty much the basics of banking?


Part of the problem is that a lot of people who are taught economics at university are taught an out of date, incorrect version of how banking works. These people can be some of the most resistant to accepting the truth, because it involves them admitting they were wrong about something they really thought they understood. Ego gets in the way. Then they start arguing from their own authority, dismissing everybody else as ignorant, point-blank refusing to accept evidence that contradicts their beliefs, etc...

Blackadder has apparently carved himself a spot on this forum an "banking expert." Not so easy to subsequently admit it when you've made a big boob.
UndercoverElephant
 
Posts: 6617
Age: 48
Male

Country: UK
United Kingdom (uk)
Print view this post

Re: Positive Money - Cranks?

#54  Postby Panderos » Feb 21, 2014 9:38 pm

VazScep wrote:The bees might not realise they are building a hive.

I know what you're saying here but it seems unlikely that applies in banking, at least to the fundamentals. Banks in a particular country are part of a centralised system controlled by a central bank which can only work in one way in a given place. So not knowing how it works would be like not knowing the rules of a board game you yourself have designed.

Predicting the effects, sure, that might be hard. But not knowing how the different accounts interact would render banks unable to operate.
"A witty saying proves nothing." - Voltaire
User avatar
Panderos
THREAD STARTER
 
Posts: 2971

United Kingdom (uk)
Print view this post

Re: Positive Money - Cranks?

#55  Postby UndercoverElephant » Feb 21, 2014 9:39 pm

If PositiveMoney really were cranks, then it would not be hard to find a credible refutation of their claims. That Blackadder has had to resort to posting a badly-written "first draft" of something that looks like an academic paper about this history of banking but is actually written by a retired industrial chemist speaks volumes. That he dismisses direct quotes from senior banking figures backing up PositiveMoney's claims speaks even more volumes.

There is no way the banking industry would allow PM to campaign the way they are campaigning, with no attempt to refute it, and not attempt to claim they have been misquoted, if PM's central claims are false.

I have read and watched multiple sources making the same claims, and providing the same historical context. I have seen no credible refutation of it. I have discussed this on numerous internet forums and never seen it debunked. Apart from the sheer unfairness and audacity, which in itself makes it near-unbelievable, there is no reason to disbelieve it.
UndercoverElephant
 
Posts: 6617
Age: 48
Male

Country: UK
United Kingdom (uk)
Print view this post

Ads by Google


Re: Positive Money - Cranks?

#56  Postby UndercoverElephant » Feb 21, 2014 9:42 pm

Panderos wrote:
VazScep wrote:The bees might not realise they are building a hive.

I know what you're saying here but it seems unlikely that applies in banking, at least to the fundamentals. Banks in a particular country are part of a centralised system controlled by a central bank which can only work in one way in a given place. So not knowing how it works would be like not knowing the rules of a board game you yourself have designed.

Predicting the effects, sure, that might be hard. But not knowing how the different accounts interact would render banks unable to operate.


Yes, but it is only the people at the top, or people who have direct knowledge of how the systems work (e.g. the programmers who write the software) who would know if there was a widely-believed mythology in circulation. Most of the workers in the banking industry, and most students of economics, could easily have got this wrong. They have no more reason to understand it than bees have to understand they are building a hive. It's not something every economist or bank employee would know.

As I said before, I know somebody who was studying for a doctorate in economics when I introduced her to these ideas, and it was news to her. She was shocked.
UndercoverElephant
 
Posts: 6617
Age: 48
Male

Country: UK
United Kingdom (uk)
Print view this post

Re: Positive Money - Cranks?

#57  Postby Panderos » Feb 21, 2014 11:57 pm

UndercoverElephant wrote:There is no way the banking industry would allow PM to campaign the way they are campaigning, with no attempt to refute it, and not attempt to claim they have been misquoted, if PM's central claims are false.

I just don't believe this is true. Conspiracy theorists are routinely ignored by the people they accuse of conspiracy.
"A witty saying proves nothing." - Voltaire
User avatar
Panderos
THREAD STARTER
 
Posts: 2971

United Kingdom (uk)
Print view this post

Re: Positive Money - Cranks?

#58  Postby Thommo » Feb 22, 2014 12:04 am

UndercoverElephant wrote:As I said before, I know somebody who was studying for a doctorate in economics when I introduced her to these ideas, and it was news to her. She was shocked.


I was pretty shocked that time you linked it the world ending in, when was it 2012? It must be several years later now and shock has faded to bemusement.
User avatar
Thommo
 
Posts: 20083

Print view this post

Re: Positive Money - Cranks?

#59  Postby Panderos » Feb 22, 2014 12:18 am

What is your opinion of the people in the OP here, Thommo?

Do you feel confident you know how banking works on a basic level?
"A witty saying proves nothing." - Voltaire
User avatar
Panderos
THREAD STARTER
 
Posts: 2971

United Kingdom (uk)
Print view this post

Re: Positive Money - Cranks?

#60  Postby Thommo » Feb 22, 2014 12:24 am

Panderos wrote:What is your opinion of the people in the OP here, Thommo?

Do you feel confident you know how banking works on a basic level?


On a really basic level maybe. Not enough to substantively contribute to the debate.

My gut feeling is that it is fairly clear that the modern world is richer than the medieval one and that all the created wealth is not merely illusory, how that ties into the creation of money or the creation of money from nothing is likely to tie in to how money is defined which probably gets quite technical and outside of my understanding.
User avatar
Thommo
 
Posts: 20083

Print view this post

PreviousNext

Return to Economics

Who is online

Users viewing this topic: No registered users and 1 guest