🎓 Dr. Freemo 🇳🇱 @freemo@social.cleverlibre.org

@Shamar

Just saw this question. still looking for an answer or did khird set you in the right direction?

@khird

@raucao Thsi is one of my areas of expertise, so I can say quite confidently yo uhave the finer details wrong but you do seem to have read up on this because you are using many of the words 90% correctly. So I do appreciate youve tried to put time into learning this stuff and not trying to knock that,.

> That's not how it works, sorry. In fractional reserve banking, the bank actually does not lend out deposited money (for the most part). It lends out money that wasn't ever deposited, beyond the reserve requirement

This isnt true, when you "beyond the reserve limit" the technical term for that is "Excess reserve". It **is** money they have, it is cash sitting in their account at first, that cash can be obtained either from the fed throught he resale of bonds or from deposits.

The excess reserves are money they actually have on their balance shit either being held from a depositor or their own cash obtained from the feds. They can then loan out that excess reserve at which point they dont have the cash themselves anymore on their personal bank balance sheet but you, as the depositor keep it on your balance sheet.

So its actually the other way around, the bank is loaning out money **they** have (they got it from you or the feds).. it is you who claims to have money **you** dont have... the balance on your checking sheet is 90% higher than the actual funds you have waiting in reserve int he bank (and you agreed to that being the case when you gave it to them).

@raucao It does not and is not an attempt at illustrating the fractional reserve part of the system, so you are correct it does not illustrate the "money multiplier" effect

However it isnt entierly accurate to say that they are loaning out money they dont have. They have the money in their vault, the agreement you make with a bank when you deposit the money is that you are loaning them the money and they are free to do with it whatever they want, including loan it to others. So it is absolutely their money to loan, you gave it to them for that purpose.

The deal you made with the bank is basically that they are allowed to loan out your money for as long as you keep it deposited and in return they will pay you a percentage of interest on your money as a sort of profit sharing on the money they make off being able to loan your money. In addition to that they will offer you the service of protecting your money.

So while you arent wrong your wording seems a bit disingenuous to me.They have the money, they took the loan from you and in exchange use the money they loaned and loan it to others.

@deezthugs@liberdon.com

Thats not actually true. Some loans create new money, others do not. We have a fractional reserve system and a certain percentage of new money can be used for loans. While the loan is active it represents new money yes and once the loan is paid back it represents that money being destroyed (until it can be loaned out again).. But once its paid back it is paid back with interest. At this point the extra money it has is old money and not part of the base reserve. As such when it is loaned out it isnt creating new money anymore.

The reaon for this is that a normal loan is not in itself money creation because the asset the loan gives is combined with a debt that goes with the loan. So the persons net equity (the amount of actual cash in the economy that is theirs) is 0. The reason it creates new money on up to the reserve rate in a fractional system is because they are allowed to loan out a portion if the new money they go without the bank owing any debt on that money.. so it multiplies it because the excess reserve (amount over required minimum in a fractional system) is free to the bank to use

@General

'What is to give light must endure the burning.”
--Viktor Frankl

@L29Ah

None of those things are called liquid wealth they are however assets that can, under normal circumstances, be converted to liquid wealth, not the same. That being said, no they didnt dispear, but they have stopped being owned.

Liquid wealth would be M0, MB, M1, M2, M3 and MZM, none of the ass=ets you listed are in those categories they are not liquid, only easily made liquid

Again there are just so many fundamentals of economics here that we really need to go back to if your really trying to understand why these ideas aren't correct.

When a market becomes insolvant then liquid wealth has dried up... what that means is first recession hits, people stop buying things or investing,t hey keep their money to eat and susvive.. First they live off cash (their liquid wealth).. they do this until they run out. Next they start taking out loans from banks with their homes as collaterl, their assets are lost as well(or in your example the futures they own would be put up as collateral to the bank). If the depression continues then you even default on those lones and loose even your non liquid assets.

What this means is in extream cases of insolvancy where a recession is allowed to go on without intervention all of the liquid wealth is no longer in the publics hands, they are all sitting in a bank as what is called "bank researves" they are no longer owned by the population.. So the liquid wealth is gone..

You also have to keep in mind the principle of money loaned through banks is a money multiplier. The total amount of money in the USA if you add up everyone's checking accounts and physical cash is about 10x higher than the amount of money issued by the federal reserve itself. This is only true so long as the money remains in circulation... as money moves out of peoples hands and back into bank reserves, and we move away from a liquid economy, then it has a x10 effect where the money multiplier stops being seen. that means for every $1 that a bank takes from someone who either defaulted on a loan or is paid as interest on a loan causes nine other dollars to disappear from the economy (yes like magick.

So yes, liquid wealth magically disapears, all those metal futures were you collateral for that loan you defaulted, they are now the property of the bank, not you, their liquidity has been taken from society.

> Nah, this is only true if everyone is indebted. No one forces you to get a credit for some (positive) interest rate.

This is starting to irk me a little.. this is really basic economic and really simple math. If you spent anytime studying economic systems you d know the very simple point that if you add up all the debt in a society it is **always** and garunteed to be higher than all the money in a society.. This is obvious when you cosnider that all money that has ever entered society has entered society as a loan that requires it be paid back at a higher price than the money that was borrowed. That is how we put money in the economy at all. So basic subtraction quickly proves thatthere will always be less money than what is able to cover the outstanding debt created to put that money into the economy in the first place.

> Some economical agents elect to get indebted

No **you** are the one in debt, not the other agents, you just dont know it. The act of owning money, is by definition a debt on your part. You may not have any loan out of any kind, yet you are still indebted by the intrinsic nature of having money.

The inflation of the dollar is how you pay back the debt you owe by possessing a dollar. If the government stops printing money as liquidity dries up and everyone becomes insolvent, even those holding onto cash will see the "real money" (the buying power adjusted amount of money they have) go to 0,.

You can not escape the fiat debt, even if you never took a loan in your life.

@ravenclaw @General

@icedquinn

No, programmers exist.. programmers hired to work on autonomous ups delivery drones do not, nor has anyone specialized in that since they didnt exist before now.

All of those jobs are new people that need to be hired to support the **extra** resources needd to build and maintain those drones. While some of **types** of jobs arent new.. it does generate need for new **employees** to do those jobs since there are none to support UPS drones prior to UPS drones being invented... You cant take programs from other active projects, so you need to hire new people for the new initiative and that ripples all the way through the worker base creating additional jobs at every level.

@mur2501

@L29Ah

> You aren't the only possible holder of liquid wealth, and there is liquid wealth already on the market, so there's no need to print any more

this statement is very ignorant of why and when we do Monetary and Quantitative easing... We do not engage in Qe or ME when markets are liquid, this is why its only done during recessions. In a recession the definition quality of any recession is that liquid wealth has evaporated and markets are no longer liquid. The very reason we inject money in to the system is to promote liquidity **only** when economic fallout has removed that liquidity int he first place.

In fact this is so extremely disconnected from how the system works that I think its hard for you to see just how much so. Putting aside that we only inject money into an economy when it is not liquid, you have to keep in mind that **all** money that entered the economy did so via the transaction of some form of an IOU (such as a government bond) that was garunteed to be paid back at a high rate later (with interest).

This produces a very unique and counter intuitive property common to **all** fiat economies.. That is that there is **always** less money than the debt owed. Effectivally a 100$ bill is a contract for a loan of a price higher than 100$, as is every other bill in the USA.

Therefore if they did as you proposed and stoped creating new money all together you would have whats called hyper deflation, within 30 years (the term on the bonds used to issue the money) literally all money everywhere would be at $0.. everyone would still owe money and no one would have money to pay for it.

The idea of "why cant we just stop printing money" is completely at odds with the most basic principle of fiat currency, that all fiat currency in circulation is balanced by a larger amount of debt, and always will be.

@ravenclaw @General

@icedquinn

Sure
* the team of 20 writing the AI software.
* The team of 10 doing CI for them.
* The server administrators that host the servers that push out updates.
* The network administrators across the country that need to maintain the networks to suppose the added traffic to support those updates.
* the car salesman who sell the car.
*the mechanic who needs to maintain the systems of the the, ones that are very different than others so requires specialized skills at a higher pay.
* The electrical engineer who needs to design the circuit board that will run the drones hardware, including future revisions
* The mechanical and aeronautical engineer who needs to design the physical components of the drone.
* The artist who designs the logo and painting of the shell of the drone
* the drone operator or overseer (in the case of autonomous usually monitors many drones at once) who monitors the drones and ensures the fleet is operational.
* The chemists who are designing new battery chemistries better suited to drones since range is an issue right now and we need better battery density to make them more useful.
* The people working the mines harvesting the copper, the silicon and other raw materials for the drones
* The oil rig workers who need to provide oil to the plastics industry to produce the plastic for the drone.
*The people who produce the plastic used in making the drone
* The team that tests the drones
* Regulatory agents and inspectors who review the drones compliance to FCC regulations
* RF engineers capable of designing the communication system for the drones
* Licensed RF operators to ensure the facility remains in compliance with FCC radio regulations

This is just the tip of the iceberg, the list of jobs are in fact so long I could probably go on listing people for some time.

@mur2501

@icedquinn

Yes it is a topic of open research, there is no consensus that it is destroying jobs and not simply changing or replacing them. Some people hold that opinion who have studied and researched the matter, others do not.

It is not by any measure a settled fact. Though some people (like yourself) do hold strong convictions that it is undeniably true.

@mur2501

@icedquinn

IMO youa re conflating issues. There are absolutely concerns that labour needs to face, some of that is inequality when it comes to opportunity to make money. there are also concerns with automation in the sense that the new and better jobs they get involves training and if people are poor they cant afford that, so there are issues around ensuring these people have access to training at all.

But my point is the idea that automation is eliminating jobs and making human labour obsolete is a fictitious one. Its created jobs that replace older jobs, its just that too has problems.

@mur2501

@icedquinn

I dont think the common notion of "we are rendering all human labour worthless" is at all accurate personally.

Automation in one sense or another, much of which eliminated entier classes of jobs through history, has been around since the earliest humans started building things.

Decade after decade for thousands of years new ways of automating human tasks were invented and those jobs disappeared. But there were always more and new jobs to take its place. This is no different.

@mur2501

@L29Ah

the resources were owned by someone else. I could not simply "steer" them away, they arent mine. First I had to buy the resources to steer them, and then once i had the resources where they needed to be they could be used to create new wealth by applying those resources to producing something new.

Without the money I wouldnt have had any wealth to buy the resources, so there would never have been a house built in the first place. Thus why liquid wealth (money) is needed in order to generate new wealth.

@ravenclaw @General

@L29Ah

Yes they have changed actually...

The lumber is no longer lumber, it is now a house, the labour is not the same skill level they were before, they have learned new skills building the house, therefore they represent a higher intrinsict wealth value than they did previously. The land didnt have a home on it before, therefore it was not as useful, not it has a home on it and thus is more wealth.

Wealth is not the quantity of mass you have, it is the useful function something can server. a pile of sane is less wealth than an equivalent weight of glass because glass serves more functions and is not in as much abundance as the sand.

Thats like say if you have two cows and they made and you have three cows that you didnt actually create anything, and have the same wealth because all you did was convert the light into growing grass and the growing grass into a cow. As if somehow a cow is the same quantity of wealth as a pile of grass. He is not, you can eat cows, you can use cows as beast of burden, they have more value thus represent more wealth than a pile of grass.

@ravenclaw @General

@L29Ah

Money is by definition wealth, specifically what we call "liquid wealth". Natural resources and capital goods is also wealth, we call these comodities, they are not liquid in nature.

In general wealth allows for the creation of wealth...

For example lets say you have no wealth, and have no skills to do any labour yourself. you can not create new wealth, you would likely just starve to death if you cant figure out a way to provide your own labour, and even then youll barely scrape by.

However say I give you 100K in money, you now have 100K in liquid wealth. If you spend 50K on land and then 25K on lumber, and 25K on labour you have traded your liquid wealth for commodity based wealth. If you now instruct that labour to build a house on your new land, you now have a house of 500K value.

Because you were given 100K, which is really the only reason it was possible for you at all, you were able to use that wealth to generate 400K of new wealth that didnt exist before.

@General

@mur2501

I was actually explaining earlier how the inevitable and devastating consequence of barter is it prevents people from specializing in a skill or trade. Everyone is pressured to generalize their skills and only take up skills and trades that are needed by the vast majority of a society. This is the reverse of a money society where a highly specialized expert typically can make more money than someone who is generalized.

Its one of my three laws of money I posted earlier :)

@icedquinn

@General

Improved version with some minor spelling corrections for reshare.