"Making Money"

[SonOfOdin]

This question for me has been left unanswered for YEARS

If a country runs out of money...can't it it just MAKE money?
Like, a bank can just produce money, can't it?

I dunno I used to think about this as a kid, and I still haven't figured it out

[♔Goodguy1066♔]

I started replying to this, then I realised I have no idea either! The best I can think of is that if countries were allowed to just make money, all the countries would want to do it and the value of money globally would drop. I'm sure there's a better excuse though...

[Enemy of the State]

Uhh, they are allowed to just make money. Central banks do it all the time. If you or I did it, we'd be sent to jail for counterfeiting. Governments use it as a "hidden tax". Inflation eats away at your savings. The money you earn buys less and less. It's sickening. Currency used to be tied to gold, but now it's just paper. It's an illusion.

A documentary explaining how the money scam works today:

[magickyleo101]

Uhh, they are allowed to just make money. Central banks do it all the time. If you or I did it, we'd be sent to jail for counterfeiting. Governments use it as a "hidden tax". Inflation eats away at your savings. The money you earn buys less and less. It's sickening. Currency used to be tied to gold, but now it's just paper. It's an illusion.

Ugh, I don't know why fiat currency tends to be such a weird bugbear of the libertarians and crazy right wing....

The value of currency is just as "illusory" when you tie it to gold as it is when you tie it to nothing. The value of either comes from its scarcity and the fact that people will give you stuff for it.

Libertarians and conservatives harp on and on about how the government could theoretically run the printing presses until our money was worth nothing, but if they don't actually do that the possibility of them doing so is no more relevant than the possibility of finding a giant gold deposit that destroys the value of gold. Any commodity which we chose as a medium of exchange could be rendered worthless by a sudden and massive increase in the supply, but the in the real world - as opposed to crazy right wing, need to buy gold right now world - that doesn't often happen.

And when it does happen, it can happen with gold just as much as it can happen with paper money. That's exactly what happened with Spain when you had the massive influx of gold from the new world:

Matters began to change in the 1520s with the large scale extraction of silver from the rich deposits of Mexico's Guanajuato region, but it was the opening of the silver mines in Mexico's Zacatecas and Bolivia's Potosí in 1546 that became legendary. During the 16th century, Spain held the equivalent of US$1.5 trillion (1990 terms) in gold and silver received from New Spain. Ultimately, however, these imports diverted investment away from other forms of industry and contributed to inflation in Spain in the last decades of the 16th century: "I learnt a proverb here", said a French traveler in 1603: "Everything is dear in Spain except silver".

[Enemy of the State]

Ugh, I don't know why fiat currency tends to be such a weird bugbear of the libertarians and crazy right wing....

The value of currency is just as "illusory" when you tie it to gold as it is when you tie it to nothing. The value of either comes from its scarcity and the fact that people will give you stuff for it.

Libertarians and conservatives harp on and on about how the government could theoretically run the printing presses until our money was worth nothing, but if they don't actually do that the possibility of them doing so is no more relevant than the possibility of finding a giant gold deposit that destroys the value of gold. Any commodity which we chose as a medium of exchange could be rendered worthless by a sudden and massive increase in the supply, but the in the real world - as opposed to crazy right wing, need to buy gold right now world - that doesn't often happen.

And when it does happen, it can happen with gold just as much as it can happen with paper money. That's exactly what happened with Spain when you had the massive influx of gold from the new world:

Gold isn't perfect but it's the best we have at the moment. There is unlikely to be a massive increase in the supply of gold with current technologies. Paper money however, is very easy to devalue. Even if central banks aren't reckless enough to cause massive hyperinflation(But they can be, this happens quite often in history), there is still an inflationary trend which eats away at our savings.

[magickyleo101]

Gold isn't perfect but it's the best we have at the moment. There is unlikely to be a massive increase in the supply of gold with current technologies. Paper money however, is very easy to devalue. Even if central banks aren't reckless enough to cause massive hyperinflation(But they can be, this happens quite often in history), there is still an inflationary trend which eats away at our savings.

First, if a government wants to inflate its money it can do so with or without the use of fiat currency. It doesn't have to acquire more gold; it can simply change the gold/dollar ratio by decree and the people left holding the dollars will pay the same "invisible tax." The idea that specie backing is any kind of safeguard to a government determined to inflate its currency is an illusion.

Second, if inflation has to come from somewhere, it's better that it come from the government than the guy who owns the gold mine/gold making machine. Gold doesn't have any inherent value (it's heavy, useless, yellow stuff) and soceity doesn't benefit from encouraging people to work really hard and use lots of resources on trying to get more of it. Society won't be better off if there's more gold.

But when you use gold as the currency of exchange, that's the end result. The Spanish empire declined because so many resources went into getting more gold rather than producing things of actual value. The American west and north west are filled with ghost towns from gold rushes. All of these are unmitigated loses of social value.

In other words, when gold is or is tied to your medium of exchange:
(a) You just encourage socially useless expenditures of resources and effort; and
(b) When the person working to find the gold is successful, it creates the same "invisible tax" on everyone else using the currency as inflation caused by the government does.

So I don't know about you, but if I'm going to pay an "invisible tax" from inflation I'd rather pay it to the government and at least thereby reduce the other taxes the government needs.

[chilon]

Ugh, I don't know why fiat currency tends to be such a weird bugbear of the libertarians and crazy right wing....

The value of currency is just as "illusory" when you tie it to gold as it is when you tie it to nothing.

Fiat currency is not really "tied to nothing".

In practice fiat currency is tied to state/government debt owed to private banks/lending institutions.

And even though people usually talk about inflation being the death of fiat money, there is also an inherent danger of deflation in fiat money if some certain situations arise. Like now in the USA, the economy is closer to problems with deflation than inflation.

[Amorphos]

edit; The value of gold and silver has little more meaning than paper money, really you want something more like koku [an amount of rice as currency] which has a barterable value, however I think that a universal barter would be what the markets make paper money to be anyway? I just don’t want that to be in the hands of bankers or any other private individuals, govt are more accountable so money should be produced by them.


how about a capitalist revolution!...

I think the main problem with the division of wealth is in the centralisation of money, rather than to say workers should get everything. This centralisation of money and power* [also present in communism*] leaves us in a form of serfdom to investors [mainly the top 1%] similar to how we were to feudal lords historically [its just no as obvious].

As far as I can tell in america wages were an agreement between an employer and worker, it was originally not legal to tax [income tax] said worker. It was considered that as a company grows then so should the wages of ‘all’ the participants, which includes management and workers. However it was realised that growth alternated and was generally unpredictable, thus it was accepted that profits could be taxed so as to perform a redistributing role which didn’t leave a business in a precarious position like if you put wages up.

Unfortunately this liberal attitude was subverted by the federal reserves act 1912, which made workers pay income tax in order to pay back the national debt. Since then we have all been in a boss - serf relationship to some degree, and money is generally centralised.

The fairest revolution would I think be a ‘capitalist’ one, where bosses and workers work as a team in a decentralised environment. I am not sure what the right term should be as most people think capitalism is just people going to work in a free society ~ which is what I am advocating here. However ‘capital’-ism is perhaps better left as a description of a centralised market environment.

Some people would use the term ‘market anarchism’ but I fear that this would lead to centralisation and we would still end up with a financially highly divided society. So ‘free capital communism’ perhaps? socialism even? [has many meanings].

[hellheaven1987]

Anarchi-Liberalism??

[xcorps]

Here's a timeline of the value of a dollar versus a German mark. These values reflect the need for Germany to print money following the Treaty of Versailles for reparations payments.
April 1919: 12 marks
November 1921: 263 marks
January 1923: 17,000 marks
August 1923: 4.621 million marks
October 1923: 25.26 billion marks
December 1923: 4.2 trillion marks.

[♔DARTH LEGO♔]

yeah tim has the best explanation.

You needed something to back up your currency hence why places like South Africa/ Rhodesia had stronger currency than lets say England for example in the late 50's and early 60's because of our vast mineral wealth.

Now i dont even understand it and i use to trade currency.. not now though and never that online cks but in real life. There used to be substance to currency but yup , illusion is the right word....

[Enemy of the State]

A system of fraud has existed for centuries. Banks keep only a small percentage of their deposits in reserve. In any other business, that would land you in jail.

[Simon Cashmere]

The difference between the cost of making money and the value of the money is called 'seigneurage' and is the profit the crown or state makes. Make too much money, and its value plummets.

[Vizsla]

Quantitative easing is in effect the same as printing money.
http://en.wikipedia.org/wiki/Quantitative_easing
The central banks have all been doing QE for a while now.

Zimbabwe is the most recent example of the hyperinflation that follows from printing too much money.
http://en.wikipedia.org/wiki/Zimbabwean_dollar

[Thorn777]

There once was this Tirolean village in the midst of the world-wide depression in the 1930's. They figured instead of relying on this money prone to loose value over each night, it would be a good idea to make your own money to pay for local goods and services. That idea was very successful reducing unemployment and poverty substantially and got other villages on board and the interest of several famous economists. Then the Austrian govt influenced by the private Austrian national-bank came in to end the program.

Govts have the sovereign right to issue the money, but today its the quasi-private FED and the like who have took over that sovereign right.

[Dr. Croccer]

Mass printing money means that it loses it's value. If a government starts to print money en masse, whilst it's economy is weak, there will be a very large difference between supply and demand of the money. Also, people lose confidence in a currency if it's printed at such a rate. Let's not forget that paper money is only of value because we all agree it is. People pay with 4 dollar bills because other people trust it's value. If so many money gets printed, it's value collapses. A loaf of bread, which may have costed a dollar, can now cost a million dollars in response to the money-printing. And whilst the relative value of bread has increased in that country, it's price is still 1 euro abroad. A million dollar would be one euro. It woulc cause a lot of problems with trade and investment. Mass money-printing quickly creates a snowball effect in which the currency very quickly loses it's value, and the economy collapses.

[Platon]

The moneyprinting itself is not a problem. The problem is that it's in private hands. The Gov. should have 100% control. And the value should be based on real production (and not tied to gold or something stupid like that cuz that will choke the economy..)
If a Gov. for example wants to build a bridge, and pay all the workers with newly printed money, that will have a real value, and wouldn't result in inflation.

A very good book on the subject: http://www.webofdebt.com/

[Sphere]

Just read most anything on the 1930's if you really think the gold standard is a good idea. Having control over inflation is a very good thing, and in general central banks can more or less decide what amount of inflation they want, reducing or increasing the money supply through interest rates to counter-act swings in the economy. On the gold standard this tool no longer exists and economies become very vulnerable to deflationary spirals or even high inflation.

As such nearly all monetary systems across the world are fiat systems (i.e. currency not linked to any commodity), with many having independent central banks to avoid political pressures. It takes quite a level of immodesty to so loudly proclaim that you are correct and the rest of the entire world is wrong.

[Enemy of the State]

In other words, when gold is or is tied to your medium of exchange:
(a) You just encourage socially useless expenditures of resources and effort; and
(b) When the person working to find the gold is successful, it creates the same "invisible tax" on everyone else using the currency as inflation caused by the government does.

Gold is valuable today but its value is quite stable. Yes there are historical examples of gold losing its value, but it is not likely today. Gold is not that easy to mine or it would already be devalued.
There are so many examples of paper money losing its value though. Far more than gold. I know which I'd rather trust.

Just read most anything on the 1930's if you really think the gold standard is a good idea. Having control over inflation is a very good thing, and in general central banks can more or less decide what amount of inflation they want, reducing or increasing the money supply through interest rates to counter-act swings in the economy. On the gold standard this tool no longer exists and economies become very vulnerable to deflationary spirals or even high inflation.

They cause the "swings" in the economy by playing with money supply. An increase in the money supply that isn't backed up with demand results in an unsustainable investment boom.

[Sphere]

They cause the "swings" in the economy by playing with money supply. An increase in the money supply that isn't backed up with demand results in an unsustainable investment boom.

Fit that into the 1920's and the Great Depression. Hell, you'd also have to explain the Panic of 1890 etc. all the way back to the 1720 South Sea Bubble. Certainly improper handling of monetary policy can cause such problems, but asset bubbles were commonplace under the gold standard as well, the difference is fiat systems offer a tool for combating them.