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Re: LT: RE: How banks create money out of nothing.

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  • Roy Langston
    Harry Pollard; ... Well, yes, I guess you could say a bank makes money by selling its integrity... ... We go bonkers if one fails because it has then defrauded
    Message 1 of 6 , Apr 13, 2008
      Harry Pollard;

      >What the bank sells - and gets paid for is its integrity.

      Well, yes, I guess you could say a bank makes money by
      selling its integrity...

      >Perhaps our acceptance of the notion that banks are
      >rock-solid is the reason we go bonkers one fails.

      We go bonkers if one fails because it has then defrauded us
      of our money (which has usually been given to the CEO and
      his cronies as rewards for exercising their business acumen
      on the shareholders' behalf).

      >However, banks also lend us 'money'. Well, not exactly.
      >They drop a value into our account and we can write
      >purchasing media until this value is gone.

      Oops, you forgot: we can also withdraw the same amount in
      currency.

      >We write a check and give it to someone to purchase a
      >new television set. The TV appliance owner takes it to
      >the bank and deposits it into his account. Then he
      >writes a check to buy a new sofa.

      >The furniture company then . . . . . . .

      >All these are book transactions or perhaps electronic
      >blips on a screen. To describe them as money is
      >ridiculous.

      ?? No, it is denying that what changes hands in return
      for the goods is money that is ridiculous -- to put it
      charitably.

      >They are neither measures of value, nor exchange media.

      ?? The amount of the bank balance transferred using the
      check paid for the new TV set is self-evidently and
      indisputably both a measure of its value and the medium
      used for the exchange. To deny this is simply absurd.

      >The checks we write are exchange media - or as I call
      >them purchasing media. Checks are involved in the act of
      >purchase. They exchange for the sofa or TV.

      ?? More absurdity. If it was really the check that was
      being exchanged for the sofa or TV, what would be the
      purpose of the seemingly superfluous checking account
      balance that backs it up?

      Blank out.

      A check is merely a transfer instrument that moves the real
      measure of value and medium of exchange -- the funds in the
      checking account -- from buyer to seller.

      >This is true also of credit card slips. They actually do
      >the purchasing.

      More absurdity. A credit card slip is merely the _record_
      of a tripartite transaction that created an obligation for
      the credit card company to pay the vendor, and for you to
      pay the credit card company. Unlike bank lending that
      creates a liquid account balance ex nihilo, no money is
      created by this transaction.

      >Not the credit card, nor the credit card company, but
      >the slip you sign. So the credit card slip changes
      >hands and is the purchasing medium.

      It is not a purchasing medium. It simply records the
      creation of an obligation.

      >But what about the value the bank adds to your account
      >when they make a loan? It's an obligation taken on by
      >the bank. It's a promise to pay anyone who has a claim
      >on your account.

      ?? But it is also the _means_ to make such payments! When
      a credit card company takes on an obligation to honor your
      word, it must come up with the money from its other
      resources. The bank has simply created the money out of
      thin air.

      >It's not "money creation" for again it
      >is neither an exchange medium, nor a measure of value.

      ?? It is self-evidently and indisputably both.

      >(I would hate to get into the 'Ms'.)

      No doubt...

      >As I said, you can put anything you wish into a defined
      >concept and attached any label to the result.

      As long as your intention is to mislead rather than
      enlighten...

      >However, there should be a certain homogeneity to the
      >contents of the concept and the label you attach to the
      >concept should be acceptable.

      And all credible economists accept the definition that
      checking account balances are money. No credible economist
      claims that credit card slips are money.

      >Contrast this with the clutter contained in the modern
      >concept of money. It is a "store of value" (which
      >sensible people should avoid);

      Readers may find it difficult to fathom how the wisdom of
      providing for one's future by storing value, which dates at
      least to Old Testament times, could suddenly have become
      not sensible. I know I do.

      >it is a "measure of value" (that doesn't seem to relate
      >to anything in particular);

      ?? Because it relates to everything in general that has
      value. Hello?

      >it is a "medium of exchange" (whose function has
      >overwhelmingly been replaced by other instruments).

      Try making a check function as a replacement for the
      account balance it represents, and tell us how that works
      for you (you might want to secure a "Get Out Of Jail Free"
      card, first).

      >All purchasing media are actually "promises to pay".

      Again, that is just false. A gold coin is not a promise to
      pay. It is payment.

      >Emulating the goldsmiths of yesteryear, bankers found
      >they could issue many more 'promises to pay dollars'
      >than they actually had. This, because people bringing
      >in checks to a bank did not want to cash them for dollar
      >bills, but instead deposited them to their accounts.

      >So a reputable, well-run, bank could lend a lot more
      >'promise to pay dollars' to its customers than it
      >actually had. It would keep a reserve of dollar bills
      >for customers who actually wanted them, but this would
      >be a fraction of the outstanding 'promises' it had
      >issued to its customers.

      ?? That is arrant question-begging: you are merely
      _assuming_ that a bank that engages in such questionable
      dealings is "reputable" and "well-run."

      >How much of a reserve? That depends on the bank.
      >Different banks would hold different reserves. It is a
      >mistake to make reserves a legal requirement. Reserves
      >should be the responsibility of the banks who should
      >publicize their reserve percentage.

      That might suffice if banks were not making money by
      driving down their reserve ratios to increase their
      interest income.

      -- Roy Langston


      __________________________________________________________________
      Yahoo! Canada Toolbar: Search from anywhere on the web, and bookmark your favourite sites. Download it now at
      http://ca.toolbar.yahoo.com
    • Harry Pollard
      Roy, You are arguing for the sake of arguing with no intention of discussing the question. This is shown immediately by your ... They drop a value into our
      Message 2 of 6 , Apr 14, 2008

        Roy,

         

        You are arguing for the sake of arguing with no intention of discussing the question. This is shown immediately by your reply when I said:

         

        >However, banks also lend us 'money'. Well, not >exactly. They drop a value into our account and we >can write purchasing media until this value is gone.

        You replied:

        “Oops, you forgot: we can also withdraw the same amount in currency.”

        Well. I hadn’t forgotten. I dealt with it later in the post. But you don’t appear to read a post. You read paragraph by paragraph – or sentence by sentence – and throw in your comments and funnies.

         

        One more example. I said

         

        >We write a check and give it to someone to >purchase a new television set. The TV appliance >owner takes it to the bank and deposits it into his >account. Then he writes a check to buy a new sofa.

        >The furniture company then . . . . . . .

        >All these are book transactions or perhaps electronic
        >blips on a screen. To describe them as money is
        >ridiculous.

        “No, it is denying that what changes hands in return
        for the goods is money that is ridiculous -- to put it
        charitably.”

        >They are neither measures of value, nor exchange media.

        “The amount of the bank balance transferred using the check paid for the new TV set is self-evidently and indisputably both a measure of its value and the medium used for the exchange. To deny this is simply absurd
        .”

         

        I was describing the accounting at the bank which, I repeat, I repeat are simply bookkeeping transactions. 

         

        “Using the check” is without doubt using purchasing media. I never denied that. In fact, I’ve made the point many times. A check is written in terms of the measure of value, whatever that may be, but it isn’t the “yardstick” itself.

         

        Thus, the $700 I pay for the television set with my check indicates the exchange value of the TV in terms of the outside measure of value. Neither the check, not the bookkeeping change in the bank, is in any way the measure of value.

         

        Harry

         

        ******************************

        Harry Pollard

        Henry George School of Los Angeles

        Box 655

        Tujunga  CA  91042

        (818) 352-4141

        ******************************

         

        From: LandCafe@yahoogroups.com [mailto:LandCafe@yahoogroups.com] On Behalf Of Roy Langston
        Sent: Sunday, April 13, 2008 10:13 AM
        To: LandCafe@yahoogroups.com
        Subject: [LandCafe] Re: LT: RE: How banks create money out of nothing.

         

        Harry Pollard;

        >What the bank sells - and gets paid for is its integrity.

        Well, yes, I guess you could say a bank makes money by
        selling its integrity...

        >Perhaps our acceptance of the notion that banks are
        >rock-solid is the reason we go bonkers one fails.

        We go bonkers if one fails because it has then defrauded us
        of our money (which has usually been given to the CEO and
        his cronies as rewards for exercising their business acumen
        on the shareholders' behalf).

        >However, banks also lend us 'money'. Well, not exactly.
        >They drop a value into our account and we can write
        >purchasing media until this value is gone.

        Oops, you forgot: we can also withdraw the same amount in
        currency.

        >We write a check and give it to someone to purchase a
        >new television set. The TV appliance owner takes it to
        >the bank and deposits it into his account. Then he
        >writes a check to buy a new sofa.

        >The furniture company then . . . . . . .

        >All these are book transactions or perhaps electronic
        >blips on a screen. To describe them as money is
        >ridiculous.

        ?? No, it is denying that what changes hands in return
        for the goods is money that is ridiculous -- to put it
        charitably.

        >They are neither measures of value, nor exchange media.

        ?? The amount of the bank balance transferred using the
        check paid for the new TV set is self-evidently and
        indisputably both a measure of its value and the medium
        used for the exchange. To deny this is simply absurd.

        >The checks we write are exchange media - or as I call
        >them purchasing media. Checks are involved in the act of
        >purchase. They exchange for the sofa or TV.

        ?? More absurdity. If it was really the check that was
        being exchanged for the sofa or TV, what would be the
        purpose of the seemingly superfluous checking account
        balance that backs it up?

        Blank out.

        A check is merely a transfer instrument that moves the real
        measure of value and medium of exchange -- the funds in the
        checking account -- from buyer to seller.

        >This is true also of credit card slips. They actually do
        >the purchasing.

        More absurdity. A credit card slip is merely the _record_
        of a tripartite transaction that created an obligation for
        the credit card company to pay the vendor, and for you to
        pay the credit card company. Unlike bank lending that
        creates a liquid account balance ex nihilo, no money is
        created by this transaction.

        >Not the credit card, nor the credit card company, but
        >the slip you sign. So the credit card slip changes
        >hands and is the purchasing medium.

        It is not a purchasing medium. It simply records the
        creation of an obligation.

        >But what about the value the bank adds to your account
        >when they make a loan? It's an obligation taken on by
        >the bank. It's a promise to pay anyone who has a claim
        >on your account.

        ?? But it is also the _means_ to make such payments! When
        a credit card company takes on an obligation to honor your
        word, it must come up with the money from its other
        resources. The bank has simply created the money out of
        thin air.

        >It's not "money creation" for again it
        >is neither an exchange medium, nor a measure of value.

        ?? It is self-evidently and indisputably both.

        >(I would hate to get into the 'Ms'.)

        No doubt...

        >As I said, you can put anything you wish into a defined
        >concept and attached any label to the result.

        As long as your intention is to mislead rather than
        enlighten...

        >However, there should be a certain homogeneity to the
        >contents of the concept and the label you attach to the
        >concept should be acceptable.

        And all credible economists accept the definition that
        checking account balances are money. No credible economist
        claims that credit card slips are money.

        >Contrast this with the clutter contained in the modern
        >concept of money. It is a "store of value" (which
        >sensible people should avoid);

        Readers may find it difficult to fathom how the wisdom of
        providing for one's future by storing value, which dates at
        least to Old Testament times, could suddenly have become
        not sensible. I know I do.

        >it is a "measure of value" (that doesn't seem to relate
        >to anything in particular);

        ?? Because it relates to everything in general that has
        value. Hello?

        >it is a "medium of exchange" (whose function has
        >overwhelmingly been replaced by other instruments).

        Try making a check function as a replacement for the
        account balance it represents, and tell us how that works
        for you (you might want to secure a "Get Out Of Jail Free"
        card, first).

        >All purchasing media are actually "promises to pay".

        Again, that is just false. A gold coin is not a promise to
        pay. It is payment.

        >Emulating the goldsmiths of yesteryear, bankers found
        >they could issue many more 'promises to pay dollars'
        >than they actually had. This, because people bringing
        >in checks to a bank did not want to cash them for dollar
        >bills, but instead deposited them to their accounts.

        >So a reputable, well-run, bank could lend a lot more
        >'promise to pay dollars' to its customers than it
        >actually had. It would keep a reserve of dollar bills
        >for customers who actually wanted them, but this would
        >be a fraction of the outstanding 'promises' it had
        >issued to its customers.

        ?? That is arrant question-begging: you are merely
        _assuming_ that a bank that engages in such questionable
        dealings is "reputable" and "well-run."

        >How much of a reserve? That depends on the bank.
        >Different banks would hold different reserves. It is a
        >mistake to make reserves a legal requirement. Reserves
        >should be the responsibility of the banks who should
        >publicize their reserve percentage.

        That might suffice if banks were not making money by
        driving down their reserve ratios to increase their
        interest income.

        -- Roy Langston

        __________________________________________________________
        Yahoo! Canada Toolbar: Search from anywhere on the web, and bookmark your favourite sites. Download it now at
        http://ca.toolbar.yahoo.com.

      • Roy Langston
        ... I ll thank you to keep your speculations about my intentions to yourself. ... No, you did not. What you dealt with later in the post was in the entirely
        Message 3 of 6 , Apr 15, 2008
          Harry Pollard wrote:

          >You are arguing for the sake of arguing with no
          >intention of discussing the question.

          I'll thank you to keep your speculations about my
          intentions to yourself.

          >This is shown immediately by your reply when I
          >said:
          >However, banks also lend us 'money'. Well, not
          >exactly. They drop a value into our account and we
          >can write purchasing media until this value is gone.

          >You replied:

          >"Oops, you forgot: we can also withdraw the same
          >amount in currency."

          >Well. I hadn't forgotten. I dealt with it later in
          >the post.

          No, you did not. What you dealt with later in the post was
          in the entirely different context of banks not keeping
          enough currency on hand to provide full conversion to
          everyone who DEPOSITS checks, not the full convertibility
          into currency of the checking account balances the BANKS
          CREATE ex nihilo when LENDING. First, you tried to obscure
          the fact that checking account balances are money by
          putting "money" in scare quotes, and pretending that use of
          the money in the account created by lending is confined to
          "writing purchasing media," eliding the fact that it is
          fully convertible into currency on demand. Given that you
          never identified the fact that the checkable account
          balances created by bank lending are fully convertible to
          currency on demand, I can only assume this elision was
          deliberate.

          >But you don't appear to read a post. You read
          >paragraph by paragraph - or sentence by sentence -
          >and throw in your comments and funnies.

          Perhaps that is your way of complaining that I don't let
          any of your false claims, tendentious redefinitions or
          invalid inferences taint the debate, no matter how
          seemingly minor or innocuous they may be when you introduce
          them.

          >One more example. I said

          >We write a check and give it to someone to
          >purchase a new television set. The TV appliance
          >owner takes it to the bank and deposits it into his
          >account. Then he writes a check to buy a new sofa.

          >The furniture company then . . . . . . .

          >All these are book transactions or perhaps electronic
          >blips on a screen. To describe them as money is
          >ridiculous.

          >"No, it is denying that what changes hands in return
          >for the goods is money that is ridiculous -- to put it
          >charitably."

          >They are neither measures of value, nor exchange media.

          >"The amount of the bank balance transferred using the
          >check paid for the new TV set is self-evidently and
          >indisputably both a measure of its value and the medium
          >used for the exchange. To deny this is simply absurd."

          >I was describing the accounting at the bank which, I
          >repeat, I repeat are simply bookkeeping transactions.

          However, repeating false claims does not make them true.
          "Simply bookkeeping transactions" would describe transfers
          of funds between notional accounts of a single entity, such
          as the bank moving funds from its capital account to loan
          reserves. What happens at the bank when a check clears is
          entirely different: one entity's purchasing power is
          reduced, and the purchasing power of another entity is
          increased. That is not "simply a bookeeping transaction."

          >"Using the check" is without doubt using purchasing
          >media.

          No. A check only AUTHORIZES THE TRANSFER of the real
          medium of exchange: the cash balance the check transfers
          out of the buyer's checking account and into the seller's.


          >I never denied that. In fact, I've made the point
          >many times. A check is written in terms of the
          >measure of value, whatever that may be, but it isn't
          >the "yardstick" itself.

          Right. The check is not a store of value, nor is it the
          medium of exchange. It is only a legal instrument whereby
          the real store of value and medium of exchange -- the MONEY
          in the checking account, which the bank has created ex
          nihilo -- is transferred from one party to another. As I
          have pointed out to you before, this is proved by the fact
          that a check not backed by such a money balance is quite
          useless for purposes of exchange, though it will get you a
          free ride in a police car.

          >Thus, the $700 I pay for the television set with my
          >check indicates the exchange value of the TV in terms
          >of the outside measure of value.

          ?? "Outside" measure of value? What might that mean?
          Money is the measure of value. Period.

          >Neither the check, not the bookkeeping change in the
          >bank, is in any way the measure of value.

          ?? The amount of the check is most certainly and
          indisputably the measure of the TV's value, same as if it
          were paid in currency.

          -- Roy Langston


          __________________________________________________________________
          Ask a question on any topic and get answers from real people. Go to Yahoo! Answers and share what you know at http://ca.answers.yahoo.com
        • Harry Pollard
          Roy, As is usual, it s a matter of definition. I argue that the present defined concepts are inadequate. You support them. The traditional functions of money
          Message 4 of 6 , Apr 15, 2008

            Roy,

             

            As is usual, it’s a matter of definition. I argue that the present defined concepts are inadequate. You support them.

             

            The traditional functions of money are “a measure of value”, a medium of exchange, and “a store of value”.

             

            I mentioned this in my earlier post and said:

             

            Contrast this with the clutter contained in the modern concept of money. It is a "store of value" (which sensible people should avoid); it is a "measure of value" (that doesn't seem to relate to anything in particular); it is a "medium of exchange" (whose function has overwhelmingly been replaced by other instruments).

             

            You replied piece by piece:

             

            >HP: Contrast this with the clutter contained in the >modern concept of money. It is a "store of value" >(which sensible people should avoid);

            RL: Readers may find it difficult to fathom how the wisdom of providing for one's future by storing value, which dates at least to Old Testament times, could suddenly have become not sensible. I know I do.

             

            HP: Well, you changed the subject, but that is to be expected. This is not about putting “value” away for the future. It is about using “money” as your store of value. If you were not sensible and stored away (say) $100,000 30 years ago, it would have lost about two thirds of its value over the three decades.

             

            As I suggested, this “store of value” is something that sensible people should avoid. You continue:

             

            >HP: it is a "measure of value" (that doesn't seem to

            >relate to anything in particular);

            ?? Because it relates to everything in general that has
            value. Hello?

             

            HP: Ed first pointed out that the dollar bill was backed by nothing in particular. All you will get if you take a $10 bill to the Mint is two $5 dollar bills. The dollar bill fluctuates in value – mostly downward. I wonder what could be built in the US if the yardstick over 30 years diminished in length by two thirds? Well, it doesn’t seem to bother you and so be it. You go on:

             

            >HP: it is a "medium of exchange" (whose function >has overwhelmingly been replaced by other >instruments).

            RL: Try making a check function as a replacement for the account balance it represents, and tell us how that works for you (you might want to secure a "Get Out Of Jail Free" card, first).

             

            HP: Very funny. The check is simply a purchasing medium like the credit card slip and the dollar bill. I will exchange these things for whatever I want to buy. It’s the way I exchange my wealth for someone else’s. It’s the way I buy things – which I think is a good reason for calling these pieces of paper “Purchasing Media”.

             

            So, I do.

             

            Finally:

            >HP: All purchasing media are actually "promises to >pay".

            RL: Again, that is just false. A gold coin is not a promise to pay. It is payment.

             

            HP: Just don’t go into Loblaws to buy groceries and offer the gold coin. (Not that you would do such a stupid thing.) The checker would call the manager,

             

            My golly, do I have to explain barter next?

             

            Harry

             

            ******************************

            Harry Pollard

            Henry George School of Los Angeles

            Box 655

            Tujunga  CA  91042

            (818) 352-4141

            ******************************

             

            From: LandCafe@yahoogroups.com [mailto:LandCafe@yahoogroups.com] On Behalf Of Roy Langston
            Sent: Tuesday, April 15, 2008 10:11 AM
            To: LandCafe@yahoogroups.com
            Subject: [LandCafe] Re: LT: RE: How banks create money out of nothing.

             

            Harry Pollard wrote:

            >You are arguing for the sake of arguing with no
            >intention of discussing the question.

            I'll thank you to keep your speculations about my
            intentions to yourself.

            >This is shown immediately by your reply when I
            >said:
            >However, banks also lend us 'money'. Well, not
            >exactly. They drop a value into our account and we
            >can write purchasing media until this value is gone.

            >You replied:

            >"Oops, you forgot: we can also withdraw the same
            >amount in currency."

            >Well. I hadn't forgotten. I dealt with it later in
            >the post.

            No, you did not. What you dealt with later in the post was
            in the entirely different context of banks not keeping
            enough currency on hand to provide full conversion to
            everyone who DEPOSITS checks, not the full convertibility
            into currency of the checking account balances the BANKS
            CREATE ex nihilo when LENDING. First, you tried to obscure
            the fact that checking account balances are money by
            putting "money" in scare quotes, and pretending that use of
            the money in the account created by lending is confined to
            "writing purchasing media," eliding the fact that it is
            fully convertible into currency on demand. Given that you
            never identified the fact that the checkable account
            balances created by bank lending are fully convertible to
            currency on demand, I can only assume this elision was
            deliberate.

            >But you don't appear to read a post. You read
            >paragraph by paragraph - or sentence by sentence -
            >and throw in your comments and funnies.

            Perhaps that is your way of complaining that I don't let
            any of your false claims, tendentious redefinitions or
            invalid inferences taint the debate, no matter how
            seemingly minor or innocuous they may be when you introduce
            them.

            >One more example. I said

            >We write a check and give it to someone to
            >purchase a new television set. The TV appliance
            >owner takes it to the bank and deposits it into his
            >account. Then he writes a check to buy a new sofa.

            >The furniture company then . . . . . . .

            >All these are book transactions or perhaps electronic
            >blips on a screen. To describe them as money is
            >ridiculous.

            >"No, it is denying that what changes hands in return
            >for the goods is money that is ridiculous -- to put it
            >charitably."

            >They are neither measures of value, nor exchange media.

            >"The amount of the bank balance transferred using the
            >check paid for the new TV set is self-evidently and
            >indisputably both a measure of its value and the medium
            >used for the exchange. To deny this is simply absurd."

            >I was describing the accounting at the bank which, I
            >repeat, I repeat are simply bookkeeping transactions.

            However, repeating false claims does not make them true.
            "Simply bookkeeping transactions" would describe transfers
            of funds between notional accounts of a single entity, such
            as the bank moving funds from its capital account to loan
            reserves. What happens at the bank when a check clears is
            entirely different: one entity's purchasing power is
            reduced, and the purchasing power of another entity is
            increased. That is not "simply a bookeeping transaction."

            >"Using the check" is without doubt using purchasing
            >media.

            No. A check only AUTHORIZES THE TRANSFER of the real
            medium of exchange: the cash balance the check transfers
            out of the buyer's checking account and into the seller's.

            >I never denied that. In fact, I've made the point
            >many times. A check is written in terms of the
            >measure of value, whatever that may be, but it isn't
            >the "yardstick" itself.

            Right. The check is not a store of value, nor is it the
            medium of exchange. It is only a legal instrument whereby
            the real store of value and medium of exchange -- the MONEY
            in the checking account, which the bank has created ex
            nihilo -- is transferred from one party to another. As I
            have pointed out to you before, this is proved by the fact
            that a check not backed by such a money balance is quite
            useless for purposes of exchange, though it will get you a
            free ride in a police car.

            >Thus, the $700 I pay for the television set with my
            >check indicates the exchange value of the TV in terms
            >of the outside measure of value.

            ?? "Outside" measure of value? What might that mean?
            Money is the measure of value. Period.

            >Neither the check, not the bookkeeping change in the
            >bank, is in any way the measure of value.

            ?? The amount of the check is most certainly and
            indisputably the measure of the TV's value, same as if it
            were paid in currency.

            -- Roy Langston

            __________________________________________________________
            Ask a question on any topic and get answers from real people. Go to Yahoo! Answers and share what you know at http://ca.answers.yahoo.com

          • Roy Langston
            ... Depends what you mean by the present definitions. Some are adequate, others are not. The definition of money as a broadly accepted medium of exchange,
            Message 5 of 6 , Apr 17, 2008
              Harry Pollard wrote:

              >As is usual, it's a matter of definition. I argue
              >that the present defined concepts are inadequate.
              >You support them.

              Depends what you mean by "the present" definitions. Some
              are adequate, others are not. The definition of money as a
              broadly accepted medium of exchange, and consequently a
              measure and store of value and unit of account appears to
              be one of the former.

              >HP: Contrast this with the clutter contained in the
              >modern concept of money. It is a "store of value"
              >(which sensible people should avoid);

              >RL: Readers may find it difficult to fathom how the
              >wisdom of providing for one's future by storing value,
              >which dates at least to Old Testament times, could
              >suddenly have become not sensible. I know I do.

              >HP: Well, you changed the subject, but that is to be
              >expected.

              No, I did not. Your false claim that I did was what was
              really to be expected.

              >This is not about putting "value" away for
              >the future. It is about using "money" as your store of
              >value.

              Which sensible people have been doing since before the
              Parable of the Talents, as archaeologists' routine
              discoveries of coin hoards just flat-out PROVE.

              >If you were not sensible and stored away (say)
              >$100,000 30 years ago, it would have lost about two
              >thirds of its value over the three decades.

              >As I suggested, this "store of value" is something
              >that sensible people should avoid.

              Which only shows that our present money does not store
              value as well as some other things -- but not very many
              other things. Some of the qualities that make even our
              present money a good store of value are convenience and
              liquidity, which is why almost everyone who has any value
              to store stores some of it in the form of money. How many
              things can you name that maintain their value more reliably
              than money, but do not involve a greater storage expense,
              illiquidity, volatility, or other inconveniences?

              And just out of curiosity, Harry, how much M1 (currency and
              checking account balances) are you not-very-sensibly using
              to store value right at this moment

              >HP: it is a "measure of value" (that doesn't seem to
              >relate to anything in particular);

              >?? Because it relates to everything in general that has
              >value. Hello?

              >HP: Ed first pointed out that the dollar bill was
              >backed by nothing in particular. All you will get if
              >you take a $10 bill to the Mint is two $5 dollar bills.
              >The dollar bill fluctuates in value - mostly downward.
              >I wonder what could be built in the US if the yardstick
              >over 30 years diminished in length by two thirds?

              You mean, other than everything in the economy that HAS
              been built using our diminishing monetary yardstick?
              Granted, some shaky structures such as the dot.com and
              housing bubbles, Enron, etc. have been built. But
              diminishing money was not the only or even the main reason
              for their shakiness -- and the occasional bridge or
              building collapse is not unknown, despite engineers' use of
              more reliable yardsticks.

              >Well, it doesn't seem to bother you and so be it.

              Just as it doesn't seem to bother you that the diminishing
              value of dollars is fully explained by banks' irresponsible
              creation of additional supplies of them through lending, in
              order to fabricate interest income for themselves out of
              nothing -- in fact, you even go so far as to deny they do
              so!

              >HP: it is a "medium of exchange" (whose function
              >has overwhelmingly been replaced by other
              >instruments) .

              >RL: Try making a check function as a replacement for the
              >account balance it represents, and tell us how that works
              >for you (you might want to secure a "Get Out Of Jail Free"
              >card, first).

              >HP: Very funny. The check is simply a purchasing medium
              >like the credit card slip and the dollar bill.

              Nope. Wrong. I have already explained to you why a dollar
              bill is an exchange medium, but checks and credit card
              slips are merely legal documents that effect transfers of
              or create obligations to transfer exchange media. They are
              not themselves exchange media because they stand for
              something else: the dollar bills, which don't stand for
              anything else.

              >I will exchange these things for whatever I want to buy.

              As I have already proved to you, you CAN'T exchange a check
              for whatever you want to buy unless the check effects a
              transfer of the ACTUAL exchange medium: money in your
              checking account. Likewise, you CAN'T exchange a credit
              card slip for whatever you want unless you somehow arrange
              to reimburse the credit card company for the MONEY it gives
              the vendor in return for the slip.

              >It's the way I exchange my wealth for someone else's.
              >It's the way I buy things - which I think is a good
              >reason for calling these pieces of paper "Purchasing
              >Media".

              But it is a better reason to call them "transfer
              instruments."

              >HP: All purchasing media are actually "promises to
              >pay".

              >RL: Again, that is just false. A gold coin is not a
              >promise to pay. It is payment.

              >HP: Just don't go into Loblaws to buy groceries and
              >offer the gold coin. (Not that you would do such a
              >stupid thing.) The checker would call the manager,

              I would be much safer offering a gold coin (still legal
              tender, btw, however much its bullion or numismatic value
              might exceed its face value) than a check not backed by
              _genuine_ money.

              >My golly, do I have to explain barter next?

              Please, no more "Just So" stories.

              -- Roy Langston


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