@kennethkopelson @dennisdorney

Can you guys please not derail this discussion? The discussion is about one specific hypothetical situation.

"If the banks were not allowed to print money"

They aren't. They are allowed (or required) to claim money they don't have as being on their books. So it gets confusing.

I'll re-state my example given elsewhere:

My wife wants a trailer. So I go down to the petrol station and hire one. The local Z have 1-2 on site at all times provided by Hireace. So I hire it in my name, and provide it for my wife. Yes, I added in another layer, as I noted my local petrol station hires the hire trailers.

When you look at the books, you have Hireace, Z, me, and my wife "owning" a trailer, Z, me, and my wife only temporarily. And Z, me, and my wife "owing" a trailer.

M0, there is one trailer (the "real" physical one). M1, there are 3 trailers. M3, there are 4 trailers.

The economists are the ones "making" money, not the banks. They count the same dollar multiple times. The banks re-use the money, but it's the economists that make it count multiple times. Others have indicated that counting the one trailer multiple times is silly. It's not Hireace/Z/me that's counting it as multiple trailers.

Once again, Marc Whinery you're espousing wrong ideas.

Please...EVERYONE...before doing anything else, please watch this VERY short video from the Bank of England...it explains it very quickly and very well.

https://www.youtube.com/watch?v=iFU2F8Efu4M

@marcwhinery The problem with your example is that when it comes to money, ALL the trailers can be used at the same time... all parties can hook that trailer up and carry stuff AT THE SAME TIME. Do not say they can't, because they CAN, and they ARE every single day. This is your primary misunderstanding.

Here is a more detailed video from the Bank of England:

https://www.youtube.com/watch?v=CvRAqR2pAgw

Here is a good video explaining what money is, made by the Bank of England. Of special interest is what they say about cash and coin in England. They state flatly that only 3% of the total money in circulation in England is cash/coin created by the Bank of England, and that all other money is bank deposits in private commercial banks, created by the commercial banks.

https://www.youtube.com/watch?v=ziTE32hiWdk

@kennethkopelson "Do not say they can’t, because they CAN, and they ARE every single day. This is your primary misunderstanding."

Then go back to your other "one simple question". I answered it, and you didn't comment on it, but came here to lecture me about an answer I already gave.

"1) Let’s assume the bank is empty with no reserves or other accounts. This will illustrate the point.

"2) I deposit $1000 cash in my account. The bank now has $1000 in cash assets. $100 of that is required reserves, and $900 is excess reserves that can be loaned out.

"3) You get a loan from the bank for $900. The bank puts $900 in your account recording it as a bank asset, and also $900 in your loan account as a liability.

"So, I have $1000 available to spend, and you have $900 to spend. This is precisely the case where we are BOTH using the money at the same time. "

to which I responded:
"So, you have $1000 in your account. I have $900 in mine. I take out $900 from the bank. You take out $1000. You then spend your $1000 on socks.

Wait, will the bank give you $1000 if I take out my $900?

Nope, the money isn't there. You can’t spend more than $100 of your $1000, because the amount of money never increases beyond $1000.

Does this clear up that one issue for you?"

So, care to explain to me how you are using your full $1000 after I take out $900 of "your" $1000? Come on, if I'm so wrong, you could explain it. You didn't in the topic I answered it, but brought it here to dismiss my answer, without the full background for others to read.

Just tell me how you can use your $1000 after I take my $900 out.

You keep telling me I'm wrong, but obviously don't understand it enough to explain it to anyone.

I think these videos make it very simple for anyone to understand, and it clears up all the cloudiness. There should be no question in anyone's mind after watching these videos that commercial banks create electronic money in your account, and they also provide an exchange service, allowing you to swap your electronic money for currency. They don't need more than 3% currency (which was printed by the central bank), because that is sufficient to service the needs of the economy. Clearly, 97% of all transactions is electronic...not cash.

@marcwhinery I did answer your question. If my bank account says I have $1000, I most certainly CAN buy $1000 in socks. I have NEVER had the bank tell me I could not use the money in my account, whether it came from a loan, or was put there by me, from my employer as an example. If there is $1000 in my account, that has NO BEARING on any other account, or on any other lending. If the bank loans you $900, it has no bearing on my account, since they are NOT using my money, they have created new money to lend to you. Watch the videos from the Bank of England Marc...they make it plain as day.

@marcwhinery If I go to the bank and get a $10 million dollar loan, there is NOBODY else in the bank that will be told they can't take their money out from their account. If I put money into an investment account such as Certificate of Deposit, that is different. That is me actually giving the bank special permission to put my money into an investment portfolio for a specific time frame. It actually goes into a special pool account with a bunch of other people. We aren't talking about investment accounts here.

I'm talking about plain transaction accounts, like checking and savings. Checking accounts are considered to be of type M1, while savings accounts are M2.

@marcwhinery I will explain your question in greater detail:

Let's consider steps 2 and 3 in more detail:

"2) I deposit $1000 cash in my checking account. The bank now has $1000 in cash assets. $100 of that is required reserves, and $900 is excess reserves that can be loaned out, though that is not how things really work, since banks are not constrained by reserves any more. They can lend out as much as they can in order to maximise their profits. If they require more reserves, they just get more cash from the central bank as they need them. So, lending leads to deposits, which in turn leads to acquiring reserves as needed.

2a) When I go to my account screen using Internet banking, I see my balance is $1000, and I can use all of that money at any time.

"3) Meanwhile, you get a loan from the bank for $900. Even though in reality, the bank would NOT be limited to only lending out $900, for our example, we will assume this. This loan is made by opening an account for you, and putting the $900 into it. This is done by simply setting the starting balance of your account to $900, thereby creating new M1 money (assuming it is a checking account). You also get another account for your loan, showing that you owe $900 to the bank. These are recorded in two separate accounts. The money you owe is not recorded in your checking account register. That just starts with a new opening balance of $900...created from thin air.

3a) You go to your Internet banking screen, and you see that you have two accounts showing. You have a checking account with a balance of $900, and you also have a loan account, showing that you owe the bank $900.

4) At this point, I can spend $1000 on buying things, and you can spend $900 on buying things. If I use all the money, I will have a balance of $0 in my checking account. If you spend all your money, you will have a balance of $0 in your checking account. You will still show a balance of $900 as a liability in your loan account. That will reduce as you make payments on your loan.

Can we agree that that comma, bothers me a whole lot whenever I see this post in my feed?

Which comma? :D

@kennethkopelson " I did answer your question."

You said " I’m sorry…I have checked with the top people here at ASB, and you are completely wrong in all this."

That's not answering the question. That's a factless dodge. Obviously you don't understand the issue. You can't explain the problem. You just "know" I'm wrong. Like you "know" the world is flat. "Knowing" something doesn't make it true. Why can't you tell me what part of my explanation is wrong? It was a simple question asked by you, and you don't even understand your own examples. Yet you are expert enough to build a new economic system, without any knowledge of the current system.

". If my bank account says I have $1000, I most certainly CAN buy $1000 in socks. I have NEVER had the bank tell me I could not use the money in my account, whether it came from a loan, or was put there by me, from my employer as an example. If there is $1000 in my account, that has NO BEARING on any other account, or on any other lending."

So you are abandoning your example? You had a simple question. I answered it. If you are the only person on the planet with money, and you put $1000 in a bank, then the bank loans me $900 and I take that home and put that under my mattress, how do you get your $1000? The bank doesn't have it anymore. It's not there, and can't be used by multiple people at the same time.

When you ask for it, that's what's called a "run on the bank" in that people are going to the bank and asking for more than the bank has.

Since you are so big on non-sequitur cites, as if that helps your factless and off-topic responses, I'll include one:

http://en.wikipedia.org/wiki/Bank_run

But I proved you wrong so completely that you abandoned your own example, because it's fatally flawed.

Why even pretend to have a discussion when you'll just change the question every time you are proven wrong?

I can only assume you agree you are wrong, even if you won't even admit it to yourself, otherwise, why change the question, when you were the person who made it up because you couldn't answer my question about trailers.

"Watch the videos from the Bank of England Marc…they make it plain as day."

I watched the video. You are still wrong, and still refuse to respond to your own question. Why?

How many trailers are there? How do you pull out your $1000 cash when I took $900 of it and hid it under my mattress (based on your rules where the bank has no other deposits or customers)?

If you can't answer those two simple questions, then I'll just presume you don't understand anything you've said. I don't need YouTube videos. I understand the issues. If you can't explain them, then it's obvious you don't understand them.

@marcwhinery Why do you keep confusing MONEY with CURRENCY? I never said we could both spend $1900 in CURRENCY, I said we could BOTH spend $1900 in MONEY. I also EVER said that the commercial banks create MONEY....not CURRENCY! I have answered all your questions with mounds of response. You are just being...well, I won't say it. You're not discussing this rationally any more. I have taken every effort to provide all the backing for my views. What have you provided? You keep using MONEY and CURRENCY interchangeably, and saying that I'm doing the same. Well, I'M NOT!

@kennethkopelson . I am perfectly happy with my one and only comment so far. The discussion topic is stated to be:
"Can we agree that any system that allows borrowing, will multiply the money supply?" In itself the answer to the question is simply "NO". The mere act of borrowing, if it occurs totally within the system doesn't alter the money supply at all. The money supply can only be increased by creation of new money from outside.
The discussion was then complicated by placing highly unlikely restraints on the first proposal ;" where new money can’t be minted". I dont see what useful agreement can come of this discussion.
My comments about an imagined closed economy, where the money is created debt free, are almost certainly right.
As regards your reply, if you have read other comments of mine elsewhere you will find that I have pointed out the very things you claim I dont know. However I respect the wish of David Johnston not to derail the discussion so I will withdraw from it.

@marcwhinery I have explained everything to an extreme level. You keep twisting my words, and quoting me out of context. Perhaps you work for the media...they love doing the same thing.

@marcwhinery Once again...in the example, there is $1000 of M0. But what is placed into my account is $1000 of M1, since the currency I deposited now belongs to the bank. In exchange, they give me $1000 of M1 in my account. Then, you get a loan for $900, and that is put into your account as $900 of M1. So, in the fullest exact reality, the bank has $1000 of M0, and they have created $1900 of M1 split between our accounts. If we both want to take the money out as M0 CURRENCY, they will not be able to do that immediately, but they CAN get the additional currency from the central bank. Since only 3% of the total money in circulation is CASH CURRENCY, that really won't be a problem. Runs on the bank would only happen if people lost faith in the banks, and they all wanted cash. In practice that does not happen. Once again, commercial banks do NOT create M0, they create M1, M2, and M3 money. You don't want to admit this, I can see that. To you, this is a big competition, and you are going to refuse to acknowledge these simple truths, come hell or high water.

@davidjohnston I really fail to see why people have no comprehension of the fact that only 3% of all the money in circulation is actually cash currency, and that all other money is of type M1, M2, and M3, which are various financial instruments, such as demand deposits created by banks. This is so fundamental to proper understanding of banking, and yet people seem so dead set on their incorrect views. I guess people just can't accept that they have been so incorrect for so many years, having such misconceptions about this fundamental institution. Even when people from the very central banks try to explain it to them, they find whatever lame reason to ignore all that, putting up all kinds of denial, misquotes, or just plain ignoring of the facts. If people won't even look at the evidence, and then comment on that evidence, I don't know what good it does to keep on with this.

I guess I'd like to know if anyone is actually being helped by this discourse?

@kennethkopelson I quote you out of context because you are so prolific that I'd have to quote many many pages. The quotes indicate the part of the post. They are all threaded, so any "out of context" issues could be easily resolved by scrolling up.

@kennethkopelson That, and for some reason, you have multiple responses very close to each other.

@marcwhinery It has occurred to me that perhaps you and I do indeed have different views of what money is vs. what currency is. According to my understanding, money is an intangible concept, that you can't touch, but you can identify as something that stores value, is a medium of exchange, and a unit of account. Currency is a physical embodiment of money, and is something you can put into your pocket or under the mattress...or in a bank vault. That is my simple explanation. If you want to read more about this, here is a nice article, which basically says the same thing:

http://www.differencebetween.info/difference-between-money-and-currency

Those electronic entries in my bank account, which I can subtract from using my EFTPOS card, fulfils all the requirements of money, and is in fact counted in the total money supply as reckoned by governments, banks, and economist. As stated in the following article, the money supply includes cash/coins (M0/MB), and balances held in checking (M1) and savings (M2) accounts:

http://www.investopedia.com/terms/m/moneysupply.asp

@kennethkopelson It gets confusing, so I take bits and pieces from your posts to indicate which posts and which parts of which posts I'm responding to, not to confuse, but to clarify. I could stop quoting you all together, but I thought that would be more confusing. You assert otherwise, and as you are always right, I'll do it your way, as you'd argue the point until the world ends. You've already admitted you think it's a big competition to refuse to acknowledge these simple truths.

As you note in a previous post, you don't like being quoted, so I won't quote so you don't accuse me of quoting you out of context, you violated your own example, again I can't quote, as I'm sure it'll be out of context as well.

You contradict yourself in these two unquoted posts.

The bank is insolvent if I take out $900 cash, and you try to buy $1000 of socks. Yes, they can borrow to cover that shortfall. I said " if they were insolvent (your single account holder example), they’d borrow from the Central Bank to cover any shortfall," (can I quote myself, or is that out of context as well?). So yes, you can point out that they don't have the money to pay you, but they'll borrow it to ensure solvency. I already stated that, so I'm not sure how your comments add to the discussion. I'm also confused how you are adding that to your limited example and pretending that it's within the rules you set up. It bankrupts the bank for you to buy socks (unless you change the rules to violate your example to prove me wrong). But yes, you changed your rules. Proving me wrong is much more important than telling the truth.

I proved you wrong. So you changed the rules and claimed I was wrong. I proved you wrong again, so you changed the rules again.

This isn't a competition. I'm just trying to make a single point without you changing the rules you made up after you hear my answer. If you have to change the rules of the question every time you ask it, maybe you don't understand the question yourself.

@marcwhinery Here is a nice breakdown of how much money there is in the U.S. economy, and how it's broken down into the various types:

http://www.frbsf.org/education/publications/doctor-econ/2004/april/money-supply-currency-counterfeit

So, out of 9 trillion dollars in total money, only 666 billion is currency (cash/coin), which is all produced by the Federal Reserve. All the other money in the economy is created by private commercial banks.

@marcwhinery Instead of your sarcastic lobbing of pointlessness, why not just stick with the points. You have not proved me wrong in anything here. I have maintained my same view, supported by many other authoritative sources (which is mandatory in any university paper, and also in formal debating). When I gave my own thoughts, you cited your master's education, and claimed I was wrong. So, when I brought other authoritative material to bear, you said it wasn't needed, and that I should just argue the points myself. When I did, you quoted a single sentence from a long discourse, and then took that into a direction that was saying at all what I had said. Misquoting and quoting out of context is the problem. Quoting correctly, characterising the person correctly is perfectly fine.

Also, you said that I did not answer your question, which apparently I did not to your satisfaction. So, I then provided a further example, and instead of acknowledging what I had said, you just move onto another point of attack. It's as if you just hunt for something I say that you can attack. I'm just wanting us to agree on how banking works so we can continue talking about how to make things better. What is your agenda if not the same?

@marcwhinery You know, after all this, I still want to discuss the new concepts with you. I have not allowed this to taint my view of you. I have not been belligerent towards you personally. I have continuously asked you to consider points, facts, references, sources, etc. This demonstrates that my goal is to find agreement. If in searching for materials I would have found that my views were incorrect, I would have admitted it. If I found the leading central banks saying that private banks do NOT create money (not currency), I would say so. I have no vested interest in believing one way or another. I just want to see what is true, no matter how that may look.

@marcwhinery Mark you say that I changed the rules. How exactly did I change the rules? I always maintained a sharp distinction between money and currency. Even now, I can't get you to speak about this difference. You ARE hearing me on this, right? For example, you said above:

"So yes, you can point out that they don’t have the money to pay you, but they’ll borrow it to ensure solvency."

I have said they didn't have MONEY to pay anyone, I said they don't have enough CURRENCY to pay everyone with cash. They DO have enough money, which will almost certainly be transacted using EFTPOS, credit card, or direct bank payment...so NO currency required.

I think you keep misunderstanding me because you seem to interchange currency for money as equivalent terms. When I say CURRENCY, I mean just that...cash/coins. When I say MONEY, I mean ALL forms, but mostly I'm talking about non-currency, since I will say currency when I am talking that.

@kennethkopelson "Mark you say that I changed the rules. How exactly did I change the rules?"

The $1000 deposit, then the $900 withdrawal, no other money considered. Well, until you considered central bank loans to cover the $1900 withdrawals from $1000 of reserves.

You changed the rules to allow "outside" money in when you needed it to prove your point, thus invalidating your point.

"I have said they didn’t have MONEY to pay anyone, I said they don’t have enough CURRENCY to pay everyone with cash. They DO have enough money, which will almost certainly be transacted using EFTPOS, credit card, or direct bank payment…so NO currency required."

But, in the isolated example, how does the bank with $100 in it "pay" someone $1000 for socks? That is the question you haven't answered, well, other than with irrelevant YouTube videos.

"I think you keep misunderstanding me because you seem to interchange currency for money as equivalent terms. When I say CURRENCY, I mean just that…cash/coins. When I say MONEY, I mean ALL forms, but mostly I’m talking about non-currency, since I will say currency when I am talking that."

My stance is that "money" is counting the currency more than once. It's no more "new money" than the trailer is 4-trailers, once it's on a number of balance sheets.

For convenience we allow "money" to represent "currency" but there is a 1:1 between usable money and currency. I can buy something with EFTPOS M1+ money, or I can stop by an ATM and pull out the cash, and spend that. There is no difference to me. And, in a practical sense, no difference to the money system either.

I can't spend money that I couldn't put in cash. The only time I've ever done that where when I bough something with borrowed money (the houses I own). But, I was close to being able to borrow against equity the house I live in to pay cash for the rental house, but, for tax purposes, it's better to borrow as much as possible, so I did borrow against the equity in the rental house, so I didn't see the cash for that house, but I could have if I really wanted. Then I could have satisfied @terangikaiwhiriake 's example by borrowing cash and walking over to Barfoot and Thompson and buying a house in borrowed cash. But I'm sure they preferred it being a bank transfer, as we did.

If there's not a currency to back the money, it's not money, it's just a debt. The monetary system counts $1 owed as $1, even if it isn't usable. Like the trailer example.

"Money" is claim to "currency". Without "currency" there is no "money". In your example, the "money" is multiplied with an (obviously) restricted "currency", showing how the system can fail (the second withdrawal is a run on the bank). You can't spend money without currency. The banks hide and obfuscate the claims on currency so that people don't notice there's not enough currency in the system.

They are big and complex. As you note, even the people that run them confuse what they do with how they do it. Oh, and if you watched any BoE videos, you'd note that many of them harp on the "confidence" required in the system. So of course those you talk to will have bought into the confidence part of banks. It's required for them to work (According to your own cites at the Bank of England). The confidence is that the over-subscribed money (currency) will be available when needed.

And yes, it's like bandwidth. The ISP has 10 Gbps upstream to Telecom. But, in aggregate, sells 100 Gbps in a thousand 100 Mbps connections. The upstream bandwidth is "currency" and the sold bandwidth is "money". Over-subscribed currency is "money". You can't have user bandwidth without upstream bandwidth. And adding more users doesn't make more upstream bandwidth (unless they borrow more bandwidth from the RBNZ (Royal Bandwidth NZ)).

User bandwidth doesn't exist unless used, and if used, it's using currency (upstream bandwidth). You can trade bandwidth with your neighbor, use intermediate ISPs.

It started almost as a joke, but bandwidth makes a really good analogy for money. An ISP over-subscribing "money" doesn't create "bandwidth", but allows multiple people to claim the same thing, so long as they don't use it at the same time. It works at ISP level because people don't use all of it all the time. But if they did, the system would break down (like when you try to spend $1000 from a bank with $100 in it).

@kennethkopelson I've answered every question you've asked to the best of my ability. You've not answered any direct questions I've asked of you.

"How many trailers are there?"

"How do you spend money after I took $900 out of the bank?"

Why do you think I should answer every question you ask of me, when you answer none I ask in return?

It doesn't seem fair. I even answer when you loaded your "example" designed to prove me wrong. But you get frustrated when I don't give the answer you were fishing for, yet don't answer any question I ask. Well, you link unrelated BoE videos, and claim that's an answer. But it isn't. How many trailers does @kennethkopelson think there are, not how does @kennethkopelson think the Bank of England would answer the question.

@marcwhinery You are 100% incorrect that all money is backed by currency. I'll state again...the U.S. has 9 trillion in the official counted money supply. They have 666 billion in currency. This is your PRIMARY problem, and the entire reason we are having this misalignment. The fact is, in New Zealand, banks are NOT required to have ANY cash backing to their money. The reserve in New Zealand is 0%, as it is in Canada, Australia, and a few other places. The UK has 3% of their total money supply in currency.

This where you are fundamentally mistaken, and until you revise your thinking about what money is, my words will always seem wrong to you. Again, there are 3 requirements for anything to be money:

1) Unit of accounting
2) Storage of value
3) Medium of exchange

Currency has all those features, plus one more:

4) Durability - it can't legitimately be destroyed.

These are not definitions I made up. These are the official, real, and commonly understood definitions within the financial industry. Common folks see money and currency as the same, because they wrongly assume that all money is somehow backed by a 1:1 ratio of currency. If that were true, we would have 100% reserves...which we are VERY far from.

Listen Marc...you keep wanting to call the sky green, when clearly it is blue/red during the day, and black at night. You really can't do much when somebody insists on doing that. My explanation is backed up by every banking authority or financial authority one can find. I challenge you to find ONE...just ONE reputable expert source who will back up your view of the financial world. Certainly, you can do that...

@marcwhinery Here is section from the Wikipedia article on bank reserve requirements:

"Canada, the UK, New Zealand, Australia and Sweden have no reserve requirements.
This does not mean that banks can - even in theory - create money without limit. On the contrary: banks are constrained by capital requirements, which are arguably more important than reserve requirements even in countries that have reserve requirements.
It also does not mean that a commercial bank's overnight reserves can become negative, in these countries. On the contrary: the central bank will always step in to lend the necessary reserves if necessary so that this does not happen: this is sometimes described as "defending the payment system". Historically, a central bank might once have run out of reserves to lend and so have had to suspend redemptions, but this cannot happen anymore to modern central banks because of the end of the gold standard worldwide, which means that all nations use a fiat currency."

http://en.wikipedia.org/wiki/Reserve_requirement

@marcwhinery What kind of silliness is it to say I have not answered any of your questions? What game are you playing?

You asked:

“How many trailers are there?”

To which I responded:

"The problem with your example is that when it comes to money, ALL the trailers can be used at the same time… all parties can hook that trailer up and carry stuff AT THE SAME TIME. Do not say they can’t, because they CAN, and they ARE every single day. This is your primary misunderstanding."

They you asked:

“How do you spend money after I took $900 out of the bank?”

To which I responded:

"Once again…in the example, there is $1000 of M0. But what is placed into my account is $1000 of M1, since the currency I deposited now belongs to the bank. In exchange, they give me $1000 of M1 in my account. Then, you get a loan for $900, and that is put into your account as $900 of M1. So, in the fullest exact reality, the bank has $1000 of M0, and they have created $1900 of M1 split between our accounts. If we both want to take the money out as M0 CURRENCY, they will not be able to do that immediately, but they CAN get the additional currency from the central bank."

Clearly you are not seeing that I have answered you fully.

@marcwhinery you said:

"My stance is that “money” is counting the currency more than once. It’s no more “new money” than the trailer is 4-trailers, once it’s on a number of balance sheets."

You say it is economists who are creating money. No, economists are merely counting what banks are doing.

In your quote above, you said "my stance is that 'money' is counting the currency more than once."

This is not true, since currency has a "money" quality itself, just like bank deposits do. In set theory, "money" is the super-set, and "currency" is a sub-class of money, a special "species" of money.

As I explained above, for anything to be considered money, it only needs three qualities. So in a very real sense, BitCoin is real, legitimate money. Because the coins do not get destroyed, it is also considered to be currency. That is what separates currency as a special type of money. Gold bullion is not money, however, since it cannot be used as a medium of exchange in our current system.

Looked at another way, in our system, money is the DOLLAR, while currency is a ONE DOLLAR BILL. If you had $5000 in your checking account, and $100 cash in your pocket, your net worth would be $5100. Those checking deposit dollars are just as real as the $100 bill.

One of the main reasons why banks DO NOT WANT to have any more cash than absolutely necessary to satisfy cash requirements is because that cash COSTS THEM MONEY. They do not own it, they must borrow it from RBNZ at interest. So, they look at their statistical requirements for cash, and only keep what they need to in order to allow for their customer's demand for cash. In today's world, that demand is quite low...around 3% or so on average. In NZ nearly everyone uses EFTPOS or direct bank transfer for everything, and only use cash very sparingly.

@marcwhinery As I've thought about this overnight some more, I realized that there is an opportunity for someone to create a 100% electronic bank, and because there is no reserve requirement in NZ, this could be started at very low cost. Basically, this bank would simply have the limitation that it will not accept or give cash/coin. Basically, it only deals in electronic money. This becomes possible when there is no reserve requirement. So, what would this allow? Well, for one, VERY low interest loans or even FREE loans. In other words, the very system I'm talking about with VBE could be launched in our economy as a private commercial bank that only deals in electronic stateful money...it would not deal in currency of any kind. This is quite a brilliant idea actually! Please Marc...get past your present stance on what you think money is, and come over to the fuller definition. It opens up all kinds of possibilities when you do.

@davidjohnston I agreed with your very limited scenario you provided in the discussion heading. What more do you want to say about it? I've been wanting to hear your next statement in response to the one I made at the top.

@kennethkopelson “The problem with your example is that when it comes to money, ALL the trailers can be used at the same time… all parties can hook that trailer up and carry stuff AT THE SAME TIME. Do not say they can’t, because they CAN, and they ARE every single day. This is your primary misunderstanding.”

I got lost in there. Is that 1? Not 1? How does the definition of "money" affect the number of trailers?

@kennethkopelson “Once again…in the example, there is $1000 of M0. But what is placed into my account is $1000 of M1, since the currency I deposited now belongs to the bank. In exchange, they give me $1000 of M1 in my account. Then, you get a loan for $900, and that is put into your account as $900 of M1. So, in the fullest exact reality, the bank has $1000 of M0, and they have created $1900 of M1 split between our accounts. If we both want to take the money out as M0 CURRENCY, they will not be able to do that immediately, but they CAN get the additional currency from the central bank.”

So the answer is "you can't spend the money, because no new money is created, and I have your $900"?

Again, you get into explaining how I mis understand something that's unrelated to the question asked.

Yes, you answered them. You might as well answer every question as "42". You answer is no more relevant than that. I was trying to set up a dialogue. You mistakenly guessed where the dialogue was going, and didn't answer the question asked, but answered what you thought to be one of the follow up questions would be.

So that's not answering the question asked.

@kennethkopelson "I really fail to see why people have no comprehension of the fact that only 3% of all the money in circulation is actually cash currency, and that all other money is of type M1, M2, and M3, which are various financial instruments, such as demand deposits created by banks. This is so fundamental to proper understanding of banking, and yet people seem so dead set on their incorrect views. I guess people just can’t accept that they have been so incorrect for so many years, having such misconceptions about this fundamental institution."

I know. I keep trying hoping one day you'll open your eyes.

@marcwhinery Open my eyes to what? You are the one who talks contradictory to yourself.

On one hand, you have said that there is a 1:1 match between the amount of currency and the amount of money.

On the other hand, we have a 3:97 ratio instead. Since these are direct quotes from reliable sources, your 1:1 is not anywhere near correct. It can't be. It's illogical.

@marcwhinery Only 3% of currency is printed by the central bank. Who creates the other 97% of money in the economy?

@kennethkopelson "Only 3% of currency is printed by the central bank. Who creates the other 97% of money in the economy?"

Money? Or currency? What are you talking about? Do you even know anymore?

"On the other hand, we have a 3:97 ratio instead. Since these are direct quotes from reliable sources, your 1:1 is not anywhere near correct. It can’t be. It’s illogical."

The answer is the same as the number of trailers. If there is one trailer, there is a 1:1 ratio. If there are more trailers, then there's 3:97.

How many trailers are there?

@marcwhinery In terms on 3% Currency and 97% money.

Currency = physical coins and notes printed by the Reserve Bank.

Money = electronic debt money created by the banks in their ledgers at the time of creating a loan. Then they charge us exorbitant interest rates etc on that money.

The Reserve Bank has the power to issue it own electronic credit at zero interest and debt free to New Zealand.

its just about where the electronic money comes from and how much we get charged for it.

One is "free", the other is ruining the country.

@marcwhinery “Only 3% of currency is printed by the central bank. Who creates the other 97% of money in the economy?”

The context of my comment made it clear that I meant to say "only 3% of the money supply is printed currency." So, answer the question please, straightforward, without any reference to any prior stories or comments. Just answer this: who CREATES the other 97% of the money supply in the economy?

@wadevuglar what you said was perfect! You couldn't have been more correct in your understanding.

@marcwhinery Your trailer analogy attempts to illustrate what currency is, showing a single trailer with multiple claims on its use. The flaw with this analogy is that money (not currency) is the CLAIM, not the trailer. This is why it is a mistake to confuse "money" with anything that has utility value in itself, such as a trailer. Money must STORE value, not HAVE intrinsic value, and since a trailer has intrinsic utility value, it is not a good analog to money.

As stated earlier, money is a "measure and store of debt-value", and as such, is conceptual and non-physical. Currency, which is physical, is simply a tangible object that has monetary value assigned to it. Trailers, like all other physical things with utility value, do not store "debt value" for the purpose of exchanging that value.

If we want to use a physical comparison to money, something like a rock would work better because it can be used to store value, exchange value, and account for value, e.g. 1 rock weighing 1 gram equals x number of value units. Also, a single rock has little utility value in itself. True, it could be used to throw at someone, but that is similar to paper currency being used to start a fire.

In our analogy then:

"value units" = money
rocks = currency

So, as stated above, 1 rock is exchangeable for x number of "value units", assuming that there are enough rocks in existence to make the exchange. "Value units" can be created instantly by making an entry in a ledger. Rocks have to be quarried, so they take time to get, and they cost money to obtain.

When a bank makes a loan, it lends "value units" not rocks. So the bank has two different roles it plays:

1) it can store rocks and exchange them for "value units" if it has enough on hand. It can also obtain more rocks if it needs them in order to make this exchange.

2) it can lend "value units" to people, charging interest (additional "value units") as compensation.

These two services are quite independent and can function independent of each other. In some countries, banks would be required to keep a certain ratio of rocks to "value units" in stock, but in New Zealand, UK, Australia, Canada, and Sweden, there is no such requirement. Each bank in those countries can decide how many rocks they will store so they provide service #1 above - exchanging "value units" for rocks.

In theory, in a country like New Zealand, a bank could decide to only provide service #2, making loans in "value units", and not dealing in rocks at all. It would then be called a "lending or finance company" in our current system.

Likewise, a bank could decide it will only provide exchange services between "value units" and rocks, accepting and storing rocks, with a small fee attached. They may also invest the "value units" with investment funds in order to grow the number of "value units" they have, which they would then pay a portion back to the people that deposited the rocks, in the form of interest. These types of "savings" banks would not typically create new "value units", since they don't make loans.

Anyhow, I hope this helps to make my thoughts clearer to you.

@kennethkopelson "Your trailer analogy attempts to illustrate what currency is, showing a single trailer with multiple claims on its use."

No. You are so busy trying to make sure that I'm wrong, that you don't even bother to pay attention to what I'm saying.

Your argument is that the receipt for the trailer is "money" and the trailer is "currency". I might go with that, but you don't speak about the trailer, you just dismiss the example.

Occasionally you go to assert my intentions (wrongly) and do a great job of proving something I didn't say is wrong. But it's not relevant to what I actually said.

"The flaw with this analogy is that money (not currency) is the CLAIM, not the trailer."

So the receipt for a trailer is "money" but the trailer is "currency"? Is that your claim?

"This is why it is a mistake to confuse “money” with anything that has utility value in itself,"

The first money (money) had value. There wasn't the level of trust built up yet.

So your argument is that currency is not money, and any system with valued currency isn't money? That seems like you are stretching really hard to try to prove me wrong. It'd be an easier job if I were actually wrong.

"such as a trailer. Money must STORE value, not HAVE intrinsic value, and since a trailer has intrinsic utility value, it is not a good analog to money."

So gold coins aren't money, even if they are currency?

Money is only money if it represents (stores) value, without having any value. I've never heard any definition of money so contrived and silly. Do you have any cites for that, or is that just your opinion asserted as fact in an attempt to prove me wrong?

Everything you say now is about how I'm wrong, and nothing about how "it" works.

http://en.wikipedia.org/wiki/Medium_of_exchange

"[Money] should have constant intrinsic value"

Note, not "store" not "represent" but "have intrinsic value".

I note when I point out reality, you talk ideals. When I talk ideals, you talk reality. You are waffling and inconsistent. You made up the $1000/$900 example, then broke your own rules of it to prove me wrong.

"So, as stated above, 1 rock is exchangeable for x number of “value units”, assuming that there are enough rocks in existence to make the exchange. “Value units” can be created instantly by making an entry in a ledger. Rocks have to be quarried, so they take time to get, and they cost money to obtain."

You are just trying to confuse. I try to keep my arguments to a more clean-slate implementation, as that's the context of your proposals. This example is "assume there is a working economy working as I describe. See! It works like I describe!!!"

Yes, it does. Your example is flawed. It fails if everyone says "rocks are too hard to carry in my pocket, I'm using the Euro." Then your economy collapses. You've proven your economy doesn't work, not how money works. In your system, the currency takes money to make, but the money takes no money to make.

I've explained my position, but you answer is always "you are wrong" without explanation.

I use real examples. You make up economies, contrived to answer some question and able to dismiss any complaints as not being how it works in your fictitious example.

"money" represents "currency" not the other way around. Money has value only because currency has value, not the other way around.

Your:
"“value units” = money
rocks = currency"

Has it exactly backwards.

Think of it this way, if the NZ government announced tomorrow that due to counterfeiting, all paper (plastic) money was invalid, and a new NZD would not be re-issued due to those problems, and we should switch to Euro, what would happen?

When the currency is worthless, the "value" in the money would drop to near zero. The "value" comes from the currency, not the other way around.

If the government announced that the paper money could be "converted" to gold at a rate of one kilo of gold per dollar of currency, what would that do to the value of the "money"?

They are intrinsically linked. But the value in the money is always a subset of the currency, not the other way around.

Though it gets more confusing when currency is no longer needed for transactions (like you always go to EFTPOS and inter-bank loans implied to cover up the massive gaps in your examples). If you go back a few years before EFTPOS and bank transfers were common, all your examples fall apart much more clearly, but I didn't want to play the "change all the rules after they are made" games you are so fond of.

@marcwhinery said:

"Your:
'value units' = money
rocks = currency”

Has it exactly backwards."

Marc, this is proof that my assumptions about your analogy were NOT incorrect, and my assessment of your errors is not a mistake at all. I do not have it backwards Marc...you do. And I said everywhere that CURRENCY is money, since MONEY is the concept. If you knew software development, you would understand when I say that MONEY is the class, and CURRENCY is an instance of that class. It is a physical embodiment of money. There are other TYPES of money Marc. Do you hear that? OTHER TYPES of money:

Cash currency = money
Coin currency = money
Gold coin = money
Electronic bank deposits = money
Travel Checks = money
Bank Checks = money
Bank Drafts = money
Money Orders = money

You said: "I use real examples. You make up economies, contrived to answer some question and able to dismiss any complaints as not being how it works in your fictitious example."

You do not use APPLICABLE examples. Your analogies do not represent the true concepts accurately. You are trying to do that, but your underlying assumptions of how things work is causing you to concoct flawed analogies. Analogies only work if they correctly illustrate the truth. Yours do not. I fully got what you were sincerely trying to explain, and I DID FULLY EXPLAIN why you are sincerely wrong. You have chosen to ignore all my explanations. Every excellent example I give, you claim to be contrived, merely because you do not agree with it. You do not agree with it, because you have a predisposed view that is contrary to it. My view is proven and established by THE authorities in this subject...the very central banks who implement the system. Your view is backed up by nobody. Please, provide ONE SINGLE reputable source that establishes what you have said. I have looked for one, and I can't find one. If you can, I'll be happy to consider it. I NEED to see some economic authority say what you have you said. You are not an authority, and that is why you need to provide one. I have provided plenty of sources. I am not relying only on my own words or thoughts. I'll be waiting...

@marcwhinery you said:

"Think of it this way, if the NZ government announced tomorrow that due to counterfeiting, all paper (plastic) money was invalid, and a new NZD would not be re-issued due to those problems, and we should switch to Euro, what would happen?"

A: First of all, the prime minister could not just dictate such a thing as switching to the Euro. But for sake of argument, nothing would happen. Non-physical money would continue to exist as they do now. Even today Euros can be converted to New Zealand dollars, so an equivalency would be established, and the existing electronic NZ dollars would be recalculated in terms of Euro value.

The NZ dollar is a unit of value. It can exist in multiple forms. It can exist as physical currency, physical traveler checks, physical bank checks, and it can exist in non-physical form also, inside of bank accounts.

The same goes for the Euro. So if my bank account had $1000 in it, and a conversion rate of 0.75 was determined on the day of switching, the balance in my account would be changed to $750, now holding that much in Euro value. Then, to handle the 3% cash needs of the country, they would ship in that much cash/coin (3% of the total money supply). No problem at all.

Now, what if the prime minister said (assuming he could) that New Zealand would not have a physical currency any more, and that all transactions are to be done strictly with EFTPOS, credit card, checks, and direct bank transactions? It would require those who now deal in cash to have to go and get an EFTPOS card...and that's about it. Things would not change at all...except that banks would no longer feel the need to borrow cash from the central bank. The central bank's role would become only as a clearing house for inter-bank electronic transfers, as it is now.

@marcwhinery Marc...please let's stop this, okay? I'm sorry, okay? I can't be frustrated any more, because I just looked at your Facebook profile, and I didn't believe what I saw. I was born in Dallas, Texas...and I was the first full-time student at Alaska Pacific University when it re-opened, when Dr. Glen Olds came there as president! I lived in the dorms there when they were completely empty. I actually took a graduate level economics course there, where there were only TWO students! My gosh man! What are the chances of our common points of connection? I've never met anyone else who went to APU. In the official records of the school, in the minutes of one of the board meetings, I gave a short speech of what it was like to be the very first full-time student when the school reopened. It's amazing how the place just blossomed!

Look, you and I have a different philosophical view on the technicalities of money...so what! It doesn't matter, not to me. I don't want us to be at odds...it serves no purpose. I'm fully willing to just drop this, and move on. For the record, I've never had anything personal against you, and I've NOT been simply wanting to prove you wrong. I truly have been open to being proven wrong, but I see how we really did get off on the wrong foot with this subject. If you are willing, I'd like to just press rewind, and go back before this particular subject came up.

@marcwhinery When I get back to Wellington this weekend I'll dig out some photos of me at the university during the winter time. I was only 17 years old :)

@marcwhinery. Marc, about a week ago I gave up on this discussion because I found it hopeless trying to argue with Kenneth. You seem to be having the same problems I did, yet I dont have this problem elsewhere. Look back over this discussion and it is totally dominated by Kenneth, not because he is right but because he doesn't listen. It isn't worth it.

@dennisdorney Noted.

@davidjohnston As Ryan has said, if you had made the proposal "Do private banks create money?" I would have voted "yes", but since you asked if they "print" money, I would have to vote "no."

I note there are a couple of other discussions with people in this discussion trying to come to consensus on this issue. Can you all do the rest of us a favour and try to keep this in the one place thanks.

@terangikaiwhiriake Yes Rangi, I think that would be good as well...

The Bank of England - one of the senior most international financial institutions - recently made this amazing - amazing historical admission in its March 2014 quarterly bulletin - that what they tell government officials about how the private central banking network funds itself has been a lie;
http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2014/qb14q1prereleasemoneycreation.pdf
• This article explains how the majority of money in the modern economy is created by commercial banks making loans.
• Money creation in practice differs from some popular misconceptions — banks do not act simply as intermediaries, lending out deposits that savers place with them, and nor do they ‘multiply up’ central bank money to create new loans and deposits.
• Rather than banks receiving deposits when households save and then lending them out, bank lending creates deposits.
Source: http://bit.ly/1z9VFMh - Please take the time to read this document.

@nathansurendran I'm not sure why you agreed to this proposal. Yes, most of us here agree that private banks CREATE money, but they do not PRINT money. They do not have any printing presses or coining machines. The distinction here is between the word PRINT and the word CREATE. The proposal used the word PRINT, so that is incorrect. Perhaps @davidjohnston can reword the proposal, or close this proposal and start a new one using the correct term "CREATE", and then I will gladly agree with it.

@nathansurendran in the realm of law and politics, EVERYTHING is about word usage. Being sloppy with words in these realms leads to all kinds of unintended consequences.

@kennethkopelson In the realm of law and politics, the use of words is deliberate in its complexity and usage of words to obfuscate the fundamental principles that are being discussed. This allows the lawyers and politicians (and economists, etc) to say 'Well you're not using the right words so you must be wrong. Trust us, we've defined the terms (more precisely 'framed the discussion around things that benefit us and our status quo') and if you don't agree, then we won’t discuss it with you.

The general public conflate creating and printing money, and the terms are used interchangeably. I'm glad that we agree that private banks CREATE (PRINT, whatever) money.

My understanding is that the Internet Mana Party has set its sights on the young, disengaged voter. This policy incubator is a free forum to discuss in any terms policy that can be made to engage that demographic, and will necessarily have to be stated in terms using the idiom of that generation to stand any chance of success...

It’s not like A: IMP is going to be able to implement the policies being discussed this time round. B: Politicians actually follow through on the promises they make in pre-election policy...

@nathansurendran Nathan, you don't "print" electronic money any more than you "print" entries to your software accounting system. The only reason it is important to not use the word "print" is because that will confuse people into thinking that banks actually print CURRENCY, as in physical notes and coins, which they do not. In many cases in life, terms can safely be interchanged, but in this particular case not using the correct term can actually lead to misunderstanding and error.

Also, it is precisely because young people may be involved that we who know better should help to educate them so that they ARE intelligent about what they are talking about, and so they can help affect change by correctly understanding the current situation.

@kennethkopelson If I can take 'currency' created by a bank when I sign it into existence via a mortgage contact, and then go exchange it at 1 to 1 for printed money (by the way, why aren't you insisting on referring to it as 'minted /printed' if you're really going to be a pedantist about it - are you suggesting coins are 'printed'), then the electronic currency is the same as the physical money. This is even more the case in the no physical backing system we have, as the coins no longer have precious metal contents that correlate to some other measure of value.

I find the 'we who know better' statement you make to be extremely condescending and also a rather sloppy use of words... If you're referring to 'we' as the older generations, 'we' have allowed the greatest robbery in history via the printing of money in the last 6 years, through the transfer of bad private sector debt from excessive, greed driven risk taking to the public sector through the bank bailouts, damning the next several generations to un-repayable levels of debt. Not to mention the continued wrecking of the environment, in the face of overwhelming scientific evidence of the destruction we're wreaking. And we've done all this for what? Celebrity consumer culture, with its bread and circuses. 'We' have royally shafted the coming generations, and 'we' will be lucky if they choose to care for us in our old age, once the governments and banksters have finished looting our pension funds, and devaluing our investment with their myopic 'more of the same to fix the problem' economic policy.

Young people have the Internet, and are generally far better informed than you appear to understand. They're aware that the current situation is bad, and the ones that will be the gifted leaders of the next generation will be far better informed regarding the probation and alternatives than the current crop of so called 'leaders'.

@dennisdorney - I think I see you point to @marcwhinery...

@nathansurendran "They’re aware that the current situation is bad, and the ones that will be the gifted leaders of the next generation will be far better informed regarding the probation and alternatives than the current crop of so called ‘leaders’."

By the time they get to the point of being "leaders" they will have the resources embedded in the old system.

Consistency is more important than efficiency. Go work for a large company, like Telecom, and you'll see that first-hand. Those that push for progress are dismissed. Those that don't stir the pot are kept on and promoted.

So by the time those robbed most have any say in the matter, they will be among those with the most to lose.

That's one of the IMP's values. Give the representation to those 18-25 so they can have a voice before they are so entrenched as to reject change.

But I disagree. We can sell the change to the National Party members. And we should be selling the change to everyone, not just the "get out the vote" party.

We are the fiscally responsible party. We want to cut the burden on the average family, not continue the pressure on the middle class that in practice ensures the poor never succeed. And yes, to be fiscally responsible, we must spend money. Getting everyone on an even start (uni for all who want it) may be a cost, but it's one that's cheaper than the alternative.

Poverty causes problems. "Cure" poverty (even if it costs money) and you cure lots of other problems. Drugs, violence, and other things are linked back to poverty.

Give people a real opportunity, and they'll have hope. Hope will motivate great change. Start small. Start big. Just start, and move to a better tomorrow. There are lots of ideas on Loomio. A few in the platform.

@marcwhinery
I think you mean: "So by the time those robbed most have any say in the matter, they will be among those WHO HAVE LOST THE MOST."

I'm very glad to see so many younger candidates in IMP. I agree that the changes needed can be sold, not just to National party, but to anyone with an desire for a more equitable and just future for all. It's a matter of self preservation. There's more and more commentary by the 1% on the potentially revolutionary conditions the 'success' of capitalism is creating.

I'm interested in why you equate an ‘even start’ with ‘university attendance’. Universities at this point are a serious part of the PROBLEM, creating conformist, highly specialised, already indebted up to their eyeballs, wage slaves who perpetuate the problem due to their need to service their debts. Looking at the current uprising in Economics departments, led by students, there's some hope for reform, but at this point I think it's too little, too late to be talking about wholsesale reform of the education system...

The economic opportunities of the future for NZ are twofold IMHO:
1) http://bit.ly/1o8JOWb - find a way to maintain and evolve the information technology infrastructure so that is can be a benefit to society into the future.
2) http://bit.ly/1jRKP3G - get away from globalised, 'efficiencies of scale' thinking, and get on with the serious task of creating a local, generalist workforce fit for the (significant and growing) task of increasing resilience and creating local food and water supplies that are strongly sustainable.

I should point out that the underlying assumptions to my line of thinking are: that we've no more cheap and high energy profit fossil fuel reserves; that we are rapidly depleting those that do exist; that we face environmental imperatives to reduce our overall economic activity going forward, in order to come back to within levels of natural resource throughput that are 'strongly' sustainable, and that the only way we can do that in any sensible time frame is to stop creating a growth imperative through the creation of money as debt that has to be serviced in the private banking system, which also solves the problem of wealth concentration to those at the top of the global banking ponzi. Here's a couple of recent blog posts where I've attempted to elaborate on this challenge: http://bit.ly/1jHEBDi http://bit.ly/LLSustSthlndBlog2

There's a large set of financial bubbles about to burst, and my hope in participation in these policy discussions is that we could have some sensible monetary reform policies ready to go so when they downturn resumes in earnest, there's a way forward out there that we can just publicise and get on with...

After a good read to catch up, I really think everyone is chasing a massive red herring. The real issue to be resolved is that we are reliant on the false economies of the US since NZ won't budge on altering the US dollar as our principal reserve currency. Thus when the US goes down the gurgler we will follow them. It doesn't matter what reforms we take internally in NZ our external economy is far more relevant and deserves out attention.

@nathansurendran "Universities at this point are a serious part of the PROBLEM,"

Are you sure you are at the right forum? This is the IMP, running on a platform of free university education for all. If unis are so evil, why are you in a forums for a party that supports that evil?

@hugokappes with such great diplomacy skills as yours, I'm surprised the party doesn't have you as a candidate.

@marcwhinery your question "Are you sure you are at the right forum?" is an irritating one that I have seen you use a couple of times now. Are YOU sure you are in the right party?

Did you not READ the rest of @nathansurendran s comment on Universities being a part of the problem.

@nathansurendran said the reason Unis are a part of the problem is because they are "creating conformist, highly specialised, already indebted up to their eyeballs, wage slaves who perpetuate the problem due to their need to service their debts".

People becoming INDEBTED UP TO THEIR EYEBALLS, WAGE SLAVES with a need to SERVICE THEIR DEBTS.

A problem that "a platform of free university education for all" would solve.

Here is a good video on this subject:

https://www.youtube.com/watch?feature=player_embedded&v=vEU13R5jt1w

@wadevuglar "People becoming INDEBTED UP TO THEIR EYEBALLS, WAGE SLAVES with a need to SERVICE THEIR DEBTS."

So, I had a nice mother. The child support paid to me (by my absent father), she collected in an account in my name. Since I was 16, I worked full time every school break, and then part-time while in uni.

With the couple thousand I had from the child support, and working every spare hour, I managed to graduate uni with no debt.

So your assertion is that I made it to 28 without ever having been a wage slave, and it wasn't until I bought my first house at 28 when I became a wage slave overnight, by building equity and hopping on the property ladder? Because that was the first time I had any "debt" and "debt" is the cause of all wage slavery, right?

That seems absurdly backwards.

I think you don't know what you think wage slavery is, but you probably heard someone say it once, and you think it makes you look smart to repeat it. Even if it has no meaning.

So many I've seen complaining about wage slavery were unemployed. So I presume it to be a form of ego protection for people incapable of finding and holding a job. Society is broken when it expects us to contribute.

Which makes me question whether @wadevuglar has a job. It's relevant to the given opinions on work. So, @wadevuglar do you have a job? Wage slavery may be bad, but it beats the alternative.

" your question is an irritating one that I have seen you use a couple of times now. "

Only when people advocate things directly contradictory to the stated IP/IMP policies. What, by "a couple of times" you mean you've seen it twice, and the only other time was questioning you?

@wadevuglar Yes, it is that I have the audacity to disagree with The Great Wade Vulgar!

If there were some problem with my logic, you'd be able to address the specific points. As you can't, I'll take that to mean 100% agreement with the facts, but that your opinion isn't fact-based, so there's no discussion that could ever get you to open your mind.

Oh, and a complete dodge on the question of whether you are employed is an answer (of a kind). What, did it hit too close to home?

@marcwhinery
Sorry, I should have qualified that statement better (and sorry for the delayed response - struggling to find time to participate fully). I do not believe that universities are 'evil' (your words). My understanding is, that there is a great challenge facing higher education, along with the rest of society. The reality of diminishing returns on capital and energy, as the global economy hits physical limits to increased growth in natural resource throughput, and therefore economic activity, and the inevitable changes this implies to our society as a whole, are the underlying context for my comments: http://bit.ly/1jHEBDi.

My comment would perhaps have read better if I'd stated "Universities at this point are a serious part of the problem,”. It's not that the prospect of higher education / universal education for all that want it is something I'm against. But look at how it's playing out in our society at the moment. Universities saw a significant increase in numbers (particularly mature students) in the last 6 years, as school leavers and the recently unemployed saw higher education as a chance to 'sit out' a period of great economic difficulty and high levels of un- and under-employment, and gain some skills that would hopefully benefit them with increased employability in the coming period.

However, Universities have generally been suffering from a combination of factors in the last decade or two that is limiting their ability to respond successfully to the challenge of producing graduates with skills fit for the future we face, in light of the challenges to business as usual apparent to those disposed to open their minds: http://bit.ly/1jAAzMS. The shift to predominantly corporate funding of research has led to a positive feedback that selects for academics that have a view of the world that is pleasing to their funders (just look at the rebellion in economics departments currently underway, and the calls for pluralism in teaching such as http://bit.ly/1qQnd5k and http://bit.ly/1ztAHbm). The problem here is that these economic interests can determine through their funding focus what kind of truth is legitimate and what is illegitimate. The reduction in grants and government funding has led to an increased and increasing reliance on loans. This has lead to both lower 'competitive advantage' (disposable income for those graduates who get a job in NZ), reducing the overall case for universtiy education, and an impetus to go overseas where the rewards are higher, and you can avoid making repayments until the debt is written off...

The solution to my mind isn’t to play within the existing rules of the system, and make (useful, relevant) education ‘free’ - the money comes from somewhere. The solution Neo, appears to be to change the rules of the game...:
'Money is just and IOU and the banks are rolling in it...' http://bit.ly/1rfcumz

In a paper called "Money Creation in the Modern Economy", co-authored by three economists from the Bank's Monetary Analysis Directorate, they stated outright that most common assumptions of how banking works are simply wrong, and that the kind of populist, heterodox positions more ordinarily associated with groups such as Occupy Wall Street are correct. In doing so, they have effectively thrown the entire theoretical basis for austerity out of the window.
To get a sense of how radical the Bank's new position is, consider the conventional view, which continues to be the basis of all respectable debate on public policy. People put their money in banks. Banks then lend that money out at interest – either to consumers, or to entrepreneurs willing to invest it in some profitable enterprise. True, the fractional reserve system does allow banks to lend out considerably more than they hold in reserve, and true, if savings don't suffice, private banks can seek to borrow more from the central bank.
The central bank can print as much money as it wishes. But it is also careful not to print too much. In fact, we are often told this is why independent central banks exist in the first place. If governments could print money themselves, they would surely put out too much of it, and the resulting inflation would throw the economy into chaos. Institutions such as the Bank of England or US Federal Reserve were created to carefully regulate the money supply to prevent inflation. This is why they are forbidden to directly fund the government, say, by buying treasury bonds, but instead fund private economic activity that the government merely taxes.
It's this understanding that allows us to continue to talk about money as if it were a limited resource like bauxite or petroleum, to say "there's just not enough money" to fund social programmes, to speak of the immorality of government debt or of public spending "crowding out" the private sector. What the Bank of England admitted this week is that none of this is really true. To quote from its own initial summary: "Rather than banks receiving deposits when households save and then lending them out, bank lending creates deposits" … "In normal times, the central bank does not fix the amount of money in circulation, nor is central bank money 'multiplied up' into more loans and deposits."
In other words, everything we know is not just wrong – it's backwards. When banks make loans, they create money. This is because money is really just an IOU. The role of the central bank is to preside over a legal order that effectively grants banks the exclusive right to create IOUs of a certain kind, ones that the government will recognise as legal tender by its willingness to accept them in payment of taxes. There's really no limit on how much banks could create, provided they can find someone willing to borrow it. They will never get caught short, for the simple reason that borrowers do not, generally speaking, take the cash and put it under their mattresses; ultimately, any money a bank loans out will just end up back in some bank again. So for the banking system as a whole, every loan just becomes another deposit. What's more, insofar as banks do need to acquire funds from the central bank, they can borrow as much as they like; all the latter really does is set the rate of interest, the cost of money, not its quantity. Since the beginning of the recession, the US and British central banks have reduced that cost to almost nothing. In fact, with "quantitative easing" they've been effectively pumping as much money as they can into the banks, without producing any inflationary effects.
What this means is that the real limit on the amount of money in circulation is not how much the central bank is willing to lend, but how much government, firms, and ordinary citizens, are willing to borrow. Government spending is the main driver in all this (and the paper does admit, if you read it carefully, that the central bank does fund the government after all). So there's no question of public spending "crowding out" private investment. It's exactly the opposite.

@marcwhinery Can I take it that you are in broad agreement with the rest of my assertions in my original comment..?

@nathansurendran You mention the artificial scarcity of money and energy, but don't mention the artificial scarcity of education. In most cases, one more body at the back of a lecture hall won't have much effect, but we charge for that.

Also, based on what I've seen, the unis here are set up to be year 14-16+, not separate institutions of learning. We should be putting the year 14-16+ education in the 0-12 years, and leaving university for more creative pursuits.

Another failure of universities is that they don't "plan" the outcomes, but let people select them. If 10,000 people want the same (useless) major, they'll do it, chasing the money. Then we'll have a glut of the (useless) major, and scarcity in other areas.

Why is the government funding so many "educations" in fields without demand or benefit?

@nathansurendran "Can I take it that you are in broad agreement with the rest of my assertions in my original comment..?"

No. I picked out one of the more outrageous claims, but I don't clam to have followed all your assertions. They range from banks to uni, to energy, and aren't very clear and focused. That I didn't go through the comment with a fine toothed comb doesn't mean that there's any agreement implied. I just saw the attack on education as a stand-out comment I decided to comment on.

Yes, there are lots of problems. Yes, many are inter-related. But that doesn't mean we need to mix them all together every chance we get.

@marcwhinery You can't solve a problem with the same thinking that created it (I think Einstein said this). By considering everything in reductionist silos we've created this mess. We need joined up thinking and for people to get out of their narrowly educated mental ruts to meet the challenges of this century.

I want to help you understand my comments. It's really important that people start thinking 'what's possible within the limits that nature imposes'. Which assertions don't you understand?

@nathansurendran "I think you mean: “So by the time those robbed most have any say in the matter, they will be among those WHO HAVE LOST THE MOST.”"

No, I meant what I said. You seem to get a general "feel" for what the other person means, then rant on about your ideas. That's not a discussion, that's a lecture. And it lacks a common ground or foundation for any agreement to come out of it.

If you aren't sure what I mean, ask. But to mis-quote me, then talk about the points you made up, unrelated to what I actually said, is a good way to end all conversation.

"It’s really important that people start thinking ‘what’s possible within the limits that nature imposes’. "

Hahaha. That's rich, coming from someone that's anti-solar, because he thinks solar is hard. It's not nature's limits you are running up against, but your own.

@marcwhinery - not saying solar is hard, and I'm definately not anti-solar. Who is misquoting now? I think the future is a renewables mix, including significant solar, just at a much lower level of net energy expenditure. It's current close to grid cost parity if you choose your system carefully, and this is changing the game for fossil fuel generators in Aus. The same wouldn't be the case here, as we're so tilted to hydro.

We already have over 70% renewable electricity generation in NZ from hydro, so I'm not even saying that we can't get to 100% of current electricity generation from renewables if we ramp up solar massively. It's just that transitioning all transport to elec is not possible with current tech. The energy expenditure for transport (approx 205 PJ) is another 1.5 times the electricity currently generated (approx 140 PJ) (source: http://bit.ly/1jEeqmM - page 25), and the build out to get that much extra generation on the grid is not possible (tech, time, capital availability, political will, etc).

As the cheap, high EROI fossil fuels we've based this current incarnation of civilisation on deplete, we have basically run out of the surplus energy that has fuelled growth. Solar depends on fossil fuels at this point. To transition successfully to it in the future, we have to have in place all kinds of things (large scale storage, better batteries, charging infrastructure) that all require huge investment over years to achieve.

Again. I think we need to consider all factors when discussing this.

"We are being told, “Renewables will save us,” but this is basically a lie. Wind and solar PV are just as much a part of our current fossil fuel system as any other source of electricity. They will only last as long as the weakest link–inverters that need replacing, batteries that need replacing, or the electric grid that needs fixing. We are being told that these are our salvation, because politicians need to have something to point to as a solution–not because they really will work." Source: http://bit.ly/TOXvkL

Sorry if this comes across as lecturing. I'm trying to explain my viewpoint and substantiate my assertions, and I'm not wanting to appear to be ranting. My copy-paste communication is because others have said this better than I can, and I'm just trying to put the relevant sections from their articles into the comments thread so others can understand where I'm coming from.

It feels like you desperately want solar to work because it holds out the hope (based on your current understanding) for maintaining the level of complexity that we've achieved. I'd say that's not possible (based on my current understanding). As stated before, I'm hopeful we can take some good things with us (the internet, smart phones, etc) that will help us to work collaboratively through this transition to a lower net energy society, but I'm realistic about the possibility of that even...

@nathansurendran " maintaining the level of complexity that we've achieved."

You've mentioned that a few times before. Do you see us living in mud huts and going back to horses for transportation?

How un-complex do you want us to be? Your statements are obviously steering us towards some end-state you have in mind, so I'm curious what that is.

Things they will NEVER teach you in macroeconomics class:

Banks actually create the money, amplify it by repeated fractional reserve lending, and get so much amplified interest that they will never lose money.

Well connected banks will still never lose money because they will be bailed out by the central bank, and it was never real money anyway, so who cares what risks they take? Little people will be allowed to fail so their assets can be bought at pennies on the printed dollar. This is called "being responsible".

Without inflation, it is impossible to pay back all debts. In fact, since the money IS debt, it would be impossible to transact at all.

The benefits of inflation accrue to the most corrupt, the most irresponsible, and the elites closest to the magic money machine. Great for social engineering as well as getting rich!

Bankers also practice social engineering and wealth redistribution by deciding whose projects get low interest loans. A loan at less than the rate of inflation might as well be a gift.

See, for example, all the loans Wall Street gave for media consolidation in America. Rolling those loans requires endless celebrity gossip, war propaganda, fearmongering, and reality TV drivel.

Bankers have everyone doing real work on their hamster wheel to pay the interest on money they created out of nothing. Keeping everyone on the hamster wheel is part of their plan. They must abolish self-sufficiency and time to think.

Bankers often manufacture financial crises so that they can then buy up real assets at pennies on the printed dollar. Insiders who know what the central bank's monetary policy will be can also make huge profits by going long/short before everyone else. The IMF enslaves entire countries this way.

The purpose of the economics profession and the academic left is to provide elaborate justifications for why the government must steal from the honest and give to the corrupt. This is called "the public good". It works for both sides of the fake political spectrum.

Most central banks are controlled by the Rothschild crime family. This includes New Zealand. Look into the Westpac connection.

Countries without a Rothschild controlled central bank: Iran, Syria, North Korea, Cuba, Venezuela, Hungary, and Iceland. Not 100% sure about this list. I do know that Libya, Iraq, Sudan and Afghanistan were recently taken off that list by the Rothschilds' henchmen. Iceland recently joined the list via a peaceful revolution. They are prospering. Hungary recently joined by kicking out the IMF. Look for assassinations or fake revolutions in these rebel countries?

The Rothschilds love war. At the very least, they get both sides deeper in debt to them. At best, they can plunder gold, install a puppet central bank in their new vassal state, and have an excuse for a financial collapse which would have happened anyway. Why do you think they are trying to start WWIII right now?

Money printing is a great enabler of police states, nanny states, war, and gluttonous consumerism.

It is impossible to create real wealth by printing money. In fact, destruction of real wealth usually results. This is part of a pincer movement against the middle class.

Stealing fake money from the puppetmasters doesn't actually cost them anything real. It simply means that they can't print as much for themselves without their inflation scam being discovered. They would rather spend that money on more swag, lackeys and dirty little jobs. This is also why they need taxes, even though it is possible to have no taxes AND a government that isn't bankrupt. In theory, the government could just create its own interest-free money, use it very sparingly, and collect fees for service. In theory, all transactions could be voluntary. In theory, a meth addict can guard a bottomless stash of meth while smoking "just a little" to stay awake. In practice it's a bit different while a corrupt oligarchy lurks in the shadows.

When ordinary people start saying "I need to buy more food before the price goes up again", empty shelves and social chaos will soon follow. Then comes "order out of chaos", i.e. an even bigger police state. The elites always want a bigger police state. They just need an excuse.

Gold is naturally occurring low inflation international currency that is very hard to steal from the little people.

Bankers both love and hate gold. They will try any scam to get it, and any scam to convince you that it has no value. Its real value is that it offers protection from psychopathic control freaks.

Sound money isn't just an economic issue, it's a moral issue. The kind of behavior that the monetary system rewards will be reflected in our culture and, eventually, our genes. Sound money rewards saving, responsibility, work, self-sufficiency, family and community bonds, frugality, and a skeptical look at anyone's promises. Banker money rewards corruption, cronyism, indolence, legalized thievery, instant gratification, bureaucratic-collectivism, vote buying, gluttony, entitlement mentality, sociopathy, gambling with other peoples' money, and snookering out real wealth for fake promises. Look at cultures now vs. 100 years ago. I think the monetary system was almost as important as the legal system in bringing about these changes. The elites are trying to socially engineer a new breed of dumb, greedy bastards who are easier to control.

F.A. Hayek and Murray Rothbard were great economists. Marx and Keynes were the worst. Marx and Keynes were financed by the Rothschilds.

Central planning always ends in disaster sooner or later. This is part of the plan. The solution is... more central planning.

Mayer Amschel Rothschild once said "Give me control of a nation's money supply, and I care not who makes the laws".

The elites plan to create a world financial dictatorship with a world central bank that will force you to have all your money on an implanted debit chip which can be zeroed out if some Rothschild flunky doesn't like you. They will manufacture a really big crisis and get you to beg for this slavery.

@nathanielcurrier "Banks actually create the money, amplify it by repeated fractional reserve lending, and get so much amplified interest that they will never lose money."

The central bank (government) creates the money, or commissions the private banks to do so.

The banks "amplify" the money, turning "money" into "money supply". They then trade the money around as much as possible, clipping the ticket as much as possible. Bob puts in money, and it's lent to Alice, and the bank charges both Bob and Alice for that service.

$20,000 per household per year is "wasted" on modern banking. Money charged to users of banks. $10k per household is removed from the economy and sent to Australia as bank profit.

Ending the banks would be like a $20,000 pay rise for all Kiwi households. Fro $20,000,000,000 a year, I have so many better plans for that which don't include paying it to bankers. But I use bankers because I don't have an alternative.

"The elites plan to create a world financial dictatorship with a world central bank that will force you to have all your money on an implanted debit chip which can be zeroed out if some Rothschild flunky doesn’t like you."

I don't believe in a global conspiracy by the Illuminati to control the planet through monetary policy. I've never seen any evidence of such a thing, and lots of independent places copying each other's banking structure doesn't make it a conspiracy any more than all my bananas are yellow and boomerang shaped is a massive fruit conspiracy.