What is Money? (Note: potentially wonkish)

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LuckyR
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Re: What is Money? (Note: potentially wonkish)

Post by LuckyR » January 18th, 2018, 2:08 am

Dlaw wrote:
January 17th, 2018, 1:10 pm
LuckyR wrote:
January 17th, 2018, 1:34 am


Regardless of who creates the money, money does not have inherent value, it is a placeholder for pre-existing value. Thus the more money exists in a given system, the overall value remains the same and the less each piece of the money is worth.
That's a very important point of debate and I'm on the other side of it.

I think that credit creates value in and of itself. Consider: are you more productive when you know there is a real possibility of financing for your ideas?
It can have value, but for the credit that most folks are familiar with doesn't do that much. Your example (if I understand it correctly) is a description of mostly psychological value.
"As usual... it depends."

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Re: What is Money? (Note: potentially wonkish)

Post by Dlaw » January 18th, 2018, 12:37 pm

LuckyR wrote:
January 18th, 2018, 2:08 am
Dlaw wrote:
January 17th, 2018, 1:10 pm


That's a very important point of debate and I'm on the other side of it.

I think that credit creates value in and of itself. Consider: are you more productive when you know there is a real possibility of financing for your ideas?
It can have value, but for the credit that most folks are familiar with doesn't do that much. Your example (if I understand it correctly) is a description of mostly psychological value.
Doesn't every economic innovation require credit (investment)?

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LuckyR
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Re: What is Money? (Note: potentially wonkish)

Post by LuckyR » January 18th, 2018, 4:38 pm

Dlaw wrote:
January 18th, 2018, 12:37 pm
LuckyR wrote:
January 18th, 2018, 2:08 am


It can have value, but for the credit that most folks are familiar with doesn't do that much. Your example (if I understand it correctly) is a description of mostly psychological value.
Doesn't every economic innovation require credit (investment)?
Not every, but I get your point. BUT explain the long term difference between Apple (known for having gigantic stores of free cash) buying a small app company and rolling the app into their OS, and thus creating extra value for the iPhone 11 and Apple choosing (for some unknown reason) to leverage billions in holdings to get tens of millions in loans to buy the same small company and later pay off the loan in some creative way that their tax lawyers come up with.
"As usual... it depends."

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Re: What is Money? (Note: potentially wonkish)

Post by Dlaw » January 20th, 2018, 3:56 pm

LuckyR wrote:
January 18th, 2018, 4:38 pm
Dlaw wrote:
January 18th, 2018, 12:37 pm


Doesn't every economic innovation require credit (investment)?
Not every, but I get your point. BUT explain the long term difference between Apple (known for having gigantic stores of free cash) buying a small app company and rolling the app into their OS, and thus creating extra value for the iPhone 11 and Apple choosing (for some unknown reason) to leverage billions in holdings to get tens of millions in loans to buy the same small company and later pay off the loan in some creative way that their tax lawyers come up with.
According to the Miller-Modigliani model maybe not. That model says that equity and debt are essentially equivalent, one just costs more than the other. There are better and worse balance sheets, but a good corporate balance sheet does not create money, it only apportions money.

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SimpleGuy
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Re: What is Money? (Note: potentially wonkish)

Post by SimpleGuy » January 20th, 2018, 4:13 pm

Money is after Marx condensed human workers power. In fact i would call money a general agreement of society to make the simple effect of work transferable to a different place without doing any mass transfer through direct trading. Just think about the bitcoin as a currency for example. So money transfers the general agreement of people to offer services to other people due to work done in a totally different place. The problem with money is more who defines the value of the money and is this then under the control of some kind of democratic government and not only under the control of a small group of people totally separated from all others ?

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Frost
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Re: What is Money? (Note: potentially wonkish)

Post by Frost » January 20th, 2018, 6:02 pm

Money is an accepted medium of exchange. It is Intentionality-dependent as it requires collective recognition. Where current money gets its value is from previous exchanges, and this can be traced back all the way to barter exchanges. This is known as the Regression Theorem. This is why there is a necessary link with some sort of precious commodity, of which gold and silver were the most superior. Mainstream economics fails on the basic philosophical/methodological level since they pretend economics is not an Intentionalistic phenomenon.

The claim that there is a negative amount of money in the world cannot be true since pyramiding debt results in devaluation of the currency. The absolute quantity of money is irrelevant.

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Re: What is Money? (Note: potentially wonkish)

Post by Dlaw » January 22nd, 2018, 2:45 am

SimpleGuy wrote:
January 20th, 2018, 4:13 pm
Money is after Marx condensed human workers power. In fact i would call money a general agreement of society to make the simple effect of work transferable to a different place without doing any mass transfer through direct trading. Just think about the bitcoin as a currency for example. So money transfers the general agreement of people to offer services to other people due to work done in a totally different place. The problem with money is more who defines the value of the money and is this then under the control of some kind of democratic government and not only under the control of a small group of people totally separated from all others ?
That's the "medium of exchange" function, but even there it gets confusing. For example, the most popular medium of exchange is debit-credit cards. Visa processes almost 50 million transactions per second. Bitcoin may get to be as fast as 8 transactions per second if they change the software. But a debit-credit card is an extremely complex financial instrument, being both a bank asset AND liability simultaneously. And since a credit card is not a simple loan but a revolving credit, how much debt do credit cards actually represent? Banks could never handle everyone maxxing out their credit cards at the same time or anything even close. My banker friend told me that one month of non-payment by all the credit card holders at a bank would immediately render the bank insolvent.

So even the most basic purchases are made using a highly complex credit scheme.

Then we get into the real heavy stuff like Repos, Reverse Repos, Tri-Party Repos, Default Swaps - and those are all pretty simple compared to the bespoke transactions bank credit desks create.

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Re: What is Money? (Note: potentially wonkish)

Post by Dlaw » January 22nd, 2018, 2:46 am

Frost wrote:
January 20th, 2018, 6:02 pm
Money is an accepted medium of exchange. It is Intentionality-dependent as it requires collective recognition. Where current money gets its value is from previous exchanges, and this can be traced back all the way to barter exchanges. This is known as the Regression Theorem. This is why there is a necessary link with some sort of precious commodity, of which gold and silver were the most superior. Mainstream economics fails on the basic philosophical/methodological level since they pretend economics is not an Intentionalistic phenomenon.

The claim that there is a negative amount of money in the world cannot be true since pyramiding debt results in devaluation of the currency. The absolute quantity of money is irrelevant.
Yeah, sorry, but this is not the way money works. Bankers create money on keyboards. End of story. Gold is a commodity. It has nothing to do with money.

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Re: What is Money? (Note: potentially wonkish)

Post by Frost » January 22nd, 2018, 10:08 am

Dlaw wrote:
January 22nd, 2018, 2:46 am
Yeah, sorry, but this is not the way money works. Bankers create money on keyboards. End of story. Gold is a commodity. It has nothing to do with money.
That bankers create money that way now does not change the history of money. If gold "has nothing to do with money" then you're attempted to deny history.

Are you attempting to deny that money is a medium of exchange and that it requires collective Intentionality in the form of collective recognition?

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Re: What is Money? (Note: potentially wonkish)

Post by Dlaw » January 22nd, 2018, 4:20 pm

Frost wrote:
January 22nd, 2018, 10:08 am
Dlaw wrote:
January 22nd, 2018, 2:46 am
Yeah, sorry, but this is not the way money works. Bankers create money on keyboards. End of story. Gold is a commodity. It has nothing to do with money.
That bankers create money that way now does not change the history of money. If gold "has nothing to do with money" then you're attempted to deny history.

Are you attempting to deny that money is a medium of exchange and that it requires collective Intentionality in the form of collective recognition?
Here's the way the world currently works:

The British Empire and the present American Empire have been and are now the dominant empires because while the rest of the world's economies produce goods and services. The City of London and Wall Street produce the world's money.

Being in the business of producing money is very complicated but it is a very, very good business to be in.

On gold, what you're saying is that gold HAD the "Exorbitant Privilege" that is now enjoyed by the U.S. Dollar (and Eurodollars, but that's complicated. Previously it was the British Pound.).

While it is true that gold HAD the "exorbitant privilege" clearly it does not any more. Gold is used as a hedge against currency risk, but then so are oil, bonds of various types, swaps, commodity indices. There's just nothing gold DOES that something else doesn't do better - much better.

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Re: What is Money? (Note: potentially wonkish)

Post by Frost » January 22nd, 2018, 6:20 pm

Dlaw wrote:
January 22nd, 2018, 4:20 pm
Here's the way the world currently works:

The British Empire and the present American Empire have been and are now the dominant empires because while the rest of the world's economies produce goods and services. The City of London and Wall Street produce the world's money.

Being in the business of producing money is very complicated but it is a very, very good business to be in.

On gold, what you're saying is that gold HAD the "Exorbitant Privilege" that is now enjoyed by the U.S. Dollar (and Eurodollars, but that's complicated. Previously it was the British Pound.).

While it is true that gold HAD the "exorbitant privilege" clearly it does not any more. Gold is used as a hedge against currency risk, but then so are oil, bonds of various types, swaps, commodity indices. There's just nothing gold DOES that something else doesn't do better - much better.
No disagreement on anything but the last line. I never claimed that gold is the current medium of exchange. I stated that "Where current money gets its value is from previous exchanges, and this can be traced back all the way to barter exchanges. This is known as the Regression Theorem. This is why there is a necessary link with some sort of precious commodity [...]". You stated that "Yeah, sorry, but this is not the way money works." What exactly are you disagreeing with on the Regression Theorem?

But regarding your last statement, I would strongly disagree, as gold has many superior qualities as a medium of exchange. The fact that it is rare is one good one, since that means that the quantity, at least today, is very slow to increase, minimizing inflation.

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Re: What is Money? (Note: potentially wonkish)

Post by Dlaw » January 23rd, 2018, 8:16 pm

Frost wrote:
January 22nd, 2018, 6:20 pm
Dlaw wrote:
January 22nd, 2018, 4:20 pm
Here's the way the world currently works:

The British Empire and the present American Empire have been and are now the dominant empires because while the rest of the world's economies produce goods and services. The City of London and Wall Street produce the world's money.

Being in the business of producing money is very complicated but it is a very, very good business to be in.

On gold, what you're saying is that gold HAD the "Exorbitant Privilege" that is now enjoyed by the U.S. Dollar (and Eurodollars, but that's complicated. Previously it was the British Pound.).

While it is true that gold HAD the "exorbitant privilege" clearly it does not any more. Gold is used as a hedge against currency risk, but then so are oil, bonds of various types, swaps, commodity indices. There's just nothing gold DOES that something else doesn't do better - much better.
No disagreement on anything but the last line. I never claimed that gold is the current medium of exchange. I stated that "Where current money gets its value is from previous exchanges, and this can be traced back all the way to barter exchanges. This is known as the Regression Theorem. This is why there is a necessary link with some sort of precious commodity [...]". You stated that "Yeah, sorry, but this is not the way money works." What exactly are you disagreeing with on the Regression Theorem?

But regarding your last statement, I would strongly disagree, as gold has many superior qualities as a medium of exchange. The fact that it is rare is one good one, since that means that the quantity, at least today, is very slow to increase, minimizing inflation.
Wow, the wonkery I hoped for has happened.

I know Mises. Are you willing to take a look at the Regression Theorem in an open-minded way?

I think I can show you where it represents the truth and where it falls down.

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Re: What is Money? (Note: potentially wonkish)

Post by Frost » January 23rd, 2018, 8:18 pm

Dlaw wrote:
January 23rd, 2018, 8:16 pm
Wow, the wonkery I hoped for has happened.

I know Mises. Are you willing to take a look at the Regression Theorem in an open-minded way?

I think I can show you where it represents the truth and where it falls down.
I'm all ears.

Dlaw
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Re: What is Money? (Note: potentially wonkish)

Post by Dlaw » January 23rd, 2018, 8:54 pm

Frost wrote:
January 23rd, 2018, 8:18 pm
Dlaw wrote:
January 23rd, 2018, 8:16 pm
Wow, the wonkery I hoped for has happened.

I know Mises. Are you willing to take a look at the Regression Theorem in an open-minded way?

I think I can show you where it represents the truth and where it falls down.
I'm all ears.
First, you have to remember that Mises/Hayek are a direct, point-for-point reaction to Marx.

So, their theory of money comes from Marx's commodity theory. It's functionally the same.

What Marx, Hayek and Mises didn't understand (because it wasn't really part of their purview) was two things:

First, the terrible economic cost of using physical specie as compared to bank balances.

Exchange using gold is costly for two reasons. First, gold is costly to initially acquire, or
transform from fixed assets. Second, wealth held in the form of gold is withheld from the productive
investment, and therefore requires a holder to bear an opportunity cost of foregone pro-
duction. These costs may be so large as to preclude exchange. However, an improvement on exchange
using gold can sometimes be offered in a cooperative “exchange bank.”

https://www.frbatlanta.org/-/media/docu ... wp9911.pdf


Once this change was made, money (qua gold) became less and less important and obviously bank ledgers dominated as they do today (as the basis for ultra-high-speed exchange). So the downfall of gold's exorbitant privilege began during the era of gold-based banking.

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Frost
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Re: What is Money? (Note: potentially wonkish)

Post by Frost » January 23rd, 2018, 9:21 pm

Dlaw wrote:
January 23rd, 2018, 8:54 pm
Frost wrote:
January 23rd, 2018, 8:18 pm


I'm all ears.
First, you have to remember that Mises/Hayek are a direct, point-for-point reaction to Marx.

So, their theory of money comes from Marx's commodity theory. It's functionally the same.

What Marx, Hayek and Mises didn't understand (because it wasn't really part of their purview) was two things:

First, the terrible economic cost of using physical specie as compared to bank balances.

Exchange using gold is costly for two reasons. First, gold is costly to initially acquire, or
transform from fixed assets. Second, wealth held in the form of gold is withheld from the productive
investment, and therefore requires a holder to bear an opportunity cost of foregone pro-
duction. These costs may be so large as to preclude exchange. However, an improvement on exchange
using gold can sometimes be offered in a cooperative “exchange bank.”

https://www.frbatlanta.org/-/media/docu ... wp9911.pdf


Once this change was made, money (qua gold) became less and less important and obviously bank ledgers dominated as they do today (as the basis for ultra-high-speed exchange). So the downfall of gold's exorbitant privilege began during the era of gold-based banking.
What does this have to do with the Regression Theorem?

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