Jump to content
  • The above Banner is a Sponsored Banner.

    Upgrade to Premium Membership to remove this Banner & All Google Ads. For full list of Premium Member benefits Click HERE.

  • Join The Silver Forum

    The Silver Forum is one of the largest and best loved silver and gold precious metals forums in the world, established since 2014. Join today for FREE! Browse the sponsor's topics (hidden to guests) for special deals and offers, check out the bargains in the members trade section and join in with our community reacting and commenting on topic posts. If you have any questions whatsoever about precious metals collecting and investing please join and start a topic and we will be here to help with our knowledge :) happy stacking/collecting. 21,000+ forum members and 1 million+ forum posts. For the latest up to date stats please see the stats in the right sidebar when browsing from desktop. Sign up for FREE to view the forum with reduced ads. 

£Sterling My Thoughts ?


Recommended Posts

As I see it:

The Government decides how much £Sterling is creates (via its spending) and is destroyes (via taxation and/or 'borrowing')

The Government can never run out of £Sterling - it's supply isn't finite

The Government cannot go bankrupt (in £Sterling)

The UK Government owns all £Sterling

The £Sterling that you believe is yours is the amount that the Government allows you to keep (to use) instead of destroying it via taxation 

If not enough £Sterling is created (but destruction carries on) then there will not be enough circulating to allow for growth; plus, because there will not be enough currency to buy the goods and services available, the price of said goods and services will fall (deflation - the limited supply of currency will, in theory, buy more of them per £), or the amount of goods and services available will have to shrink (higher unemployment).  Savings have the same effect because they tends to removes £Sterling from circulation.

If too much £Sterling is created (and not destroyed) then, in theory, the opposite will happen; too much currency will be chasing the limited amount of goods and services available, and inflation (not all inflation is caused by Government over spending) will follow; more labour will be needed to supply the extra demand, thereby pushing up wages (once the available supply of labour has been used up - i.e. everyone who wants to work can work the hours they require),  which, in theory, will lead to greater inflation. Private borrowing tend to have the same effect because they add to the circulating currency.

Link to comment
Share on other sites

  • Replies 73
  • Created
  • Last Reply

no, money supply does not go down, the velocity (money turning over) keeps going down

the minority hoarding more and more money, yet the price are suppressed down

Government borrows money more and more, just to pay interest to that minority

Link to comment
Share on other sites

The monetary system was set up and fractionalized to either confuse or simply bore people to death hoping they would just accept it as the norm, Instead, it works them to death. Money = debt, debt = misery for the majority of people. And they say crypto is a Ponzi scheme, fiat is the biggest Ponzi scheme ever invented.

Link to comment
Share on other sites

33 minutes ago, flim said:

no, money supply does not go down, the velocity (money turning over) keeps going down

the minority hoarding more and more money, yet the price are suppressed down

Government borrows money more and more, just to pay interest to that minority

The amount of £Sterling certainly does go up (Government spending it into creation) and down (Government destroying it via taxation and/or 'borrowing') all the time - it isn't static

The saving of £Sterling (without the additional creation of new currency via Governmental spending) will indeed suppress prices (deflation - see above).

The UK Government chooses to 'borrow' for quite a few different reasons - one of which is to remove £Sterling from circulation (instead of using taxation).  The UK Government does not use 'borrowing' , or taxation, to fund its spending.  The interest the UK Government pays on its Gilts is just more Government Spending - to be destroyed asand when it sees fit

Link to comment
Share on other sites

28 minutes ago, Xander said:

The monetary system was set up and fractionalized to either confuse or simply bore people to death hoping they would just accept it as the norm, Instead, it works them to death. Money = debt, debt = misery for the majority of people. And they say crypto is a Ponzi scheme, fiat is the biggest Ponzi scheme ever invented.

Totally agree in so far as currency creation by commercial banks - under license from the Government - probably, isn't the best thing since sliced bread (as it must, unlike Government created currency, be destroyed as soon as it's repaid; and the interest payable must, eventually, be born of someone's sweat).  £Sterling in itself, as something to facilitate economic exchange, isn't, IMHO, an evil thing.

Link to comment
Share on other sites

4 hours ago, reidpj said:

Totally agree in so far as currency creation by commercial banks - under license from the Government - probably, isn't the best thing since sliced bread (as it must, unlike Government created currency, be destroyed as soon as it's repaid; and the interest payable must, eventually, be born of someone's sweat).  £Sterling in itself, as something to facilitate economic exchange, isn't, IMHO, an evil thing.

This is a conflicting point of view and highlights the problem with the theory.  Debts repaid do not destroy money, they simply return it to be recycled.  If the government prints money into existence to pay its own debts it simply increases the money supply, which is normally inflationary (accepting the complexities of velocity).  So the interest government pays has to be earned somewhere (and then extracted through tax) the same as any other. 

And on that other point, debt is only a misery for those that spend more than they can afford.  If you borrow sensibly it can lead to financial security, i.e. buy a home to live in rent free and perhaps profit on long term (property usually beats inflation long term, even outside the excesses of the recent UK market).  

Link to comment
Share on other sites

The money that commercial banks loan out does not exist until the money is borrowed, and is destroyed upon repayment.  Commercial banks do not lend out saver's deposits:  https://www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/2014/money-creation-in-the-modern-economy

The interest Government pays (on money it chooses to borrow out of circulation rather than use taxation) is just Government spending money into the economy - the Government has a choice how it destroys this spending....if it so chooses 

 

Link to comment
Share on other sites

A reputable source, which one will note does not anywhere claim government spending creates money.  It states that banks (central and commercial) do so by making loans.  It was a bit of revelation at the time because it dispelled the notion of the money multiplier, which had become a popular meme on youtube to explain incorrectly how banks function. 

Link to comment
Share on other sites

There are, I admit, quite a few inaccuracies in that article.  But as a primer on how commercial banks create and destroy money (under license of the BOE/Government) it serves a purpose.

 

let's take the £460bn odd, that the BOE pumped into the economy via QE.  Where did this money come from?  The BOE certainly didn't 'loan' it into existence.

Link to comment
Share on other sites

7 hours ago, reidpj said:

 

If not enough £Sterling is created (but destruction carries on) then there will not be enough circulating to allow for growth; plus, because there will not be enough currency to buy the goods and services available, the price of said goods and services will fall (deflation - the limited supply of currency will, in theory, buy more of them per £), or the amount of goods and services available will have to shrink (higher unemployment).  Savings have the same effect because they tends to removes £Sterling from circulation.

If too much £Sterling is created (and not destroyed) then, in theory, the opposite will happen; too much currency will be chasing the limited amount of goods and services available, and inflation (not all inflation is caused by Government over spending) will follow; more labour will be needed to supply the extra demand, thereby pushing up wages (once the available supply of labour has been used up - i.e. everyone who wants to work can work the hours they require),  which, in theory, will lead to greater inflation. Private borrowing tend to have the same effect because they add to the circulating currency.

The economy and currency are not the same thing;

7 hours ago, reidpj said:

The Government decides how much £Sterling is created (via its spending) and is destroyed (via taxation and/or 'borrowing')

The Government can never run out of £Sterling - it's supply isn't finite

The Government cannot go bankrupt (in £Sterling)

The UK Government owns all £Sterling

The £Sterling that you believe is yours is the amount that the Government allows you to keep (to use) instead of destroying it via taxation 

Unless the government is the economy of course. 

Link to comment
Share on other sites

1 minute ago, KDave said:

The economy and currency are not the same thing;

Unless the government is the economy of course. 

You'll have to spell that out, please, mate.  Maybe I'm being a bit thick (not the first time), but I can't make out the point you're making.

Link to comment
Share on other sites

15 minutes ago, reidpj said:

let's take the £460bn odd, that the BOE pumped into the economy via QE.  Where did this money come from?  The BOE certainly didn't 'loan' it into existence.

No it's not loaned, they create money to buy assets (mainly bonds), with the intent to create a surplus on the financial institution's balance sheet, to encourage them to lend.  There's some technical details about changing the yield curve which the article doesnt mention but i understand is the practical effect from the point of view of financial analysts and their models.  Lower the rate of return of safe assets to the point other assets must be looked at to achieve target returns. Thats the theory, in practice we know it ends up in shares and commodities rather than business lending. 

As to inaccuracies, the primer flat out contradicts the notion that all money is created by government spending.  

Link to comment
Share on other sites

1 hour ago, Martlet said:

No it's not loaned, they create money to buy assets (mainly bonds), with the intent to create a surplus on the financial institution's balance sheet, to encourage them to lend.  There's some technical details about changing the yield curve which the article doesnt mention but i understand is the practical effect from the point of view of financial analysts and their models.  Lower the rate of return of safe assets to the point other assets must be looked at to achieve target returns. Thats the theory, in practice we know it ends up in shares and commodities rather than business lending. 

As to inaccuracies, the primer flat out contradicts the notion that all money is created by government spending.  

I have never said that all money (£Sterling) is created via Government spending - just that Government spending creates £Sterling, and that all £Sterling creation is controlled by the Government.  The UK Government doesn't have a revenue stream: Spending comes first; then, if it's deemed necessary (to control any inflation that may be caused), destruction (via taxation and/or borrowing) takes place - Governmental taxation/borrowing pay for nothing.

If the Government relied on taxation/borrowing to fund spending then in would be impossible for it to overspend. If it taxed the proposed overspending out of the economy then it would leave it without enough currency to function properly - deflation, recession.  If it went to the markets to fund said spending, the interest demanded would be eye watering.

p.s.  I have just corrected the grammatical error from which you drew your inference.

Link to comment
Share on other sites

1 hour ago, reidpj said:

If the Government relied on taxation/borrowing to fund spending then in would be impossible for it to overspend. If it taxed the proposed overspending out of the economy then it would leave it without enough currency to function properly - deflation, recession.  If it went to the markets to fund said spending, the interest demanded would be eye watering.

Yep, and thats why government has to restrain its spending to what it can raise through taxation, and moderate amount of borrow, without impacting the economy.;)

Link to comment
Share on other sites

29 minutes ago, Martlet said:

Yep, and thats why government has to restrain its spending to what it can raise through taxation, and moderate amount of borrow, without impacting the economy.;)

How are you going to pay for it?

Posted on May 4 2017

The most dangerous question in political debate in the UK is the one always rolled out by every journalist, on air or in other media, which is to ask a politician ‘How are you going to pay for it?’ where ‘it’ is whatever the politicians has just proposed to do.

Why is the question dangerous? Three reasons.

First it assumes that the government spends other people’s money. It doesn’t. It spends it’s own. That’s because it actually creates all money at the end of the day (even that put into circulation by private banks is done under government licence). And because it creates all money there is technically no limit on the amount it can produce if it so wants.

Second, this means that the assumption that the government behaves like a household with regard to debt is just wrong. Households can’t create their own money out of thin air to repay debt but governments with their own currency and central bank (as the UK has) can. £435 billion of quantitative easing since 2009 proves this and yet everyone pretends that this has not happened, which is ludicrous. The fact is that governments and households are not the same at all because households may be constrained by the need to repay debt but governments are not.

Third, so long as the creation of government debt keeps pace with inflation and it does not overheat the economy by trying to create more than full employment then government debt is not a problem any more than having money in your pocket is a problem. And that’s unsurprising because the money in your pocket is government debt. And all UK government debt is just a giant savings account for those who want an ultra-safe place to deposit their money, and what’s wrong with that?

So, what’s the answer to that question in no more than 100 or so words? Try this:

We’re not going to pay for it. We’re going to issue debt to pay for it. That’s because people like pension funds, the banking system and prudent savers are exceptionally keen to buy that debt. But more than that, government debt is just money. Read what it says on any bank note and you’ll realise that is true. And a growing economy needs more money and it’s the government’s job to create it. So we will. In that case who will pay? You could say it’s the people who are queuing up to save with the government who will pay. And we’re doing them a favour by letting them do just that.

And if the follow up question is ‘But what about repaying the debt?’ the answer is:

I really think you should look at the history of government debt since 1694. It’s grown, a lot, and almost continuously. And very rarely has any been repaid. And that’s a good thing. Because government debt is what underpins the value of our money. So repaying it cancels money. If you don’t want money I’m happy to take whatever you wish to donate, but most people see value in cash. And so do I. That’s precisely why I don’t want to repay government debt. It would cancel the money we all depend on to make our economy work. You may think that’s a good idea. I definitely do not.

And then to the bemused comment ‘But who pays then?’ which is bound to be the retort the answer is:

As I have explained the government does. It uses its money to pay. That’s the money it effectively puts into the economy by creating debt that people want to buy and it’s the money that people owe in taxes - which is then the government’s money. So the government pays. But if what you’re really saying is does this mean more tax the answer is no, it doesn’t. It means we will create more debt because the economy needs it. Just to keep pace with inflation we need to create about £50 billion of new debt a year to provide pensioners, banks and other savings institutions with the government debt that they need to keep the economy going. I’m not going to risk a financial crisis by refusing them the debt they need when at the same time I’d also be creating unemployment, harming those in need, be denying health care and would undermine education as well as the security and the safety of our country. Thanks very much, but I’ll keep the bankers and financiers of this country happy by creating the debt they need and by providing public services all at the same time.

And it you want a slogan then it’s ‘Government debt meets everyone’s needs’.

Link to comment
Share on other sites

governments use credit to create money?

my reasoning is that any money that is created has

to be paid for by the people sooner or later. currency

buys real goods and services produced by the people

of the countries that accept that currency as a means

of payment. the value is not the currency, but the goods

and services that can be exchanged for using that

currency.

if true then governments ability to create additional

money is limited by the production ability of the

people that it governs. governments should then

create money as a means to keep balanced the flow

of trade using it's currency.

 

HH

Link to comment
Share on other sites

9 minutes ago, reidpj said:

How are you going to pay for it?

Please don't quote Richard Murphy.   You understood the flaws in the argument, you cited a solid explanation on the subject, but somehow cant see the light.  His arguments are littered with historical and economical flaws, its not the place to highlight them all.  This is the silver forum where i'm sure we all recognise the history of money included the gold standard, and there was silver based money prior to that in period since 1694 :rolleyes:

Leave you with this thought, if a country has no government debt, does it therefore have no money?

Link to comment
Share on other sites

12 hours ago, Martlet said:

Please don't quote Richard Murphy.   You understood the flaws in the argument, you cited a solid explanation on the subject, but somehow cant see the light.  His arguments are littered with historical and economical flaws, its not the place to highlight them all.  This is the silver forum where i'm sure we all recognise the history of money included the gold standard, and there was silver based money prior to that in period since 1694 :rolleyes:

Leave you with this thought, if a country has no government debt, does it therefore have no money?

Currency is not the same as money; as I'm sure that you're well aware.  The UK Government is the sovereign issuer of a free-floating fiat currency - very different to a fixed fiat currency (e.g. fixed to gold; when the UK was in the ERM, etc.).  Denmark, although a sovereign issuer, has tied it's currency to the € - so is very restricted in its actions.  Greece isn't the sovereign  issuer of its currency.  If it were its finical position would, probably, be much rosier; Greece has to 'spend within her means', if she wants to spend more then she either has to raise taxes or go to the markets and pay them what the want - the UK does not; there is - although most can't or refuse to see it - a vast difference between free-floating and fixed fiat currencies.

Link to comment
Share on other sites

9 hours ago, HawkHybrid said:

massive article saying that the writer is right and other

people wrong. very academic. why can't people show

an example of where their reasoning leads to the right

outcome and where other competing theories fail?

 

HH

Which article are you referring to?

Link to comment
Share on other sites

Apologies, it was my poor attempt to try and point out the conclusion that if sterling is wealth and the government can create sterling out thin air, it can create wealth out of thin air. Does that sound right to you because I have never seen anyone create a real object from nothing before, not counting rabbits from hats of course.

We get all kinds of problems when sterling is counted as the creation of wealth rather than being seen as what it is, the medium of exchange that has no value on its own.

Link to comment
Share on other sites

I don't think £Sterling is wealth; to me it is, as your rightly point out, a medium of exchange.  £Sterling, IMHO, is not designed as a medium to store wealth (it's designed to be circulated), and therefore is very inefficient method of doing so.  The amount of circulating £Sterling reduces as more is saved; which can only result in a downturn in economic activity - unless, of course, more is issued.

In the UK £Sterling has worth (£1 will always be worth £1 - it can never be worthless); if you get a tax bill for £10 then you have to acquire £10 to pay it.

The UK Government can not (as far as I know) create wealth out of thin air.  It can, however, create as much £Sterling ('tokens' of exchange) out of thin air (both via Governmental spending, and via licensing commercial banks) as it sees fit.  If, for what're reason, the Government decided to double the amount of £Sterling tomorrow:  how much will the £1, you have in your pocket today, be worth, here in the UK, tomorrow?    £1 (not 50p); how may £1 will you need to pay the £10 tax demanded?   10 (not 20)

Link to comment
Share on other sites

14 minutes ago, reidpj said:

 If, for what're reason, the Government decided to double the amount of £Sterling tomorrow:  how much will the £1, you have in your pocket today, be worth, here in the UK, tomorrow?    £1 (not 50p); how may £1 will you need to pay the £10 tax demanded?   10 (not 20)

 

problem is everything going forward will be priced at 2x?

 

HH

Link to comment
Share on other sites

Archived

This topic is now archived and is closed to further replies.

×
×
  • Create New...

Cookies & terms of service

We have placed cookies on your device to help make this website better. By continuing to use this site you consent to the use of cookies and to our Privacy Policy & Terms of Use