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The truth is out: money is just an IOU, and the banks are rolling in it
The Guardian ^ | 18 March 2014 | David Graeber

Posted on 03/19/2014 3:14:31 PM PDT by Lorianne

The Bank of England's dose of honesty throws the theoretical basis for austerity out the window ___ Back in the 1930s, Henry Ford is supposed to have remarked that it was a good thing that most Americans didn't know how banking really works, because if they did, "there'd be a revolution before tomorrow morning".

Last week, something remarkable happened. The Bank of England let the cat out of the bag. 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.

(Excerpt) Read more at theguardian.com ...


TOPICS: Business/Economy; United Kingdom
KEYWORDS:

1 posted on 03/19/2014 3:14:31 PM PDT by Lorianne
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To: Lorianne

Meanwhile in the US, the same situation reigns. We no longer have defined dollars, but “Federal Reserve Notes.”

... and people diss bitcoin.


2 posted on 03/19/2014 3:18:30 PM PDT by aMorePerfectUnion
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To: Lorianne

"That's as good as money, sir. Those are I.O.U.'s. Go ahead and add it up, every cent's accounted for."

3 posted on 03/19/2014 3:20:53 PM PDT by dfwgator
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To: Lorianne

When it boils down to it, and it will, the only things that will matter are those you can eat, drink, smoke and shoot.


4 posted on 03/19/2014 3:22:16 PM PDT by unixfox (Abolish Slavery, Repeal the 16th Amendment)
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To: Lorianne

Fiat currency is debt. Gold is money. Silver is currency. 5000 years of history cannot be denied.


5 posted on 03/19/2014 3:36:03 PM PDT by SVTCobra03 (You can never have enough friends, horsepower or ammunition.)
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To: unixfox

Silver and gold will also have their uses. Utah and Indiana monetized silver and gold in the recent past as a statement of their faith in the Federal Reserve promissory notes people carry around in their wallets.


6 posted on 03/19/2014 3:37:06 PM PDT by MeganC (Support Matt Bevin to oust Mitch McConnell! https://mattbevin.com/)
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To: aMorePerfectUnion

Bitcoin has no intrinsic value and can disappear into the ethernet in one keystroke.


7 posted on 03/19/2014 3:37:13 PM PDT by SVTCobra03 (You can never have enough friends, horsepower or ammunition.)
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To: SVTCobra03

Right/s


8 posted on 03/19/2014 3:45:11 PM PDT by TsonicTsunami08 (SEND BITCOIN 1CYfujvffxKKPHKvrQvLP3CDb3Z5Lu7LwM Funny Money)
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To: MeganC

—Utah and Indiana monetized silver and gold

http://civsourceonline.com/2012/04/19/utah-to-accept-gold-silver-bullion-as-currency-move-highlights-broader-financial-realities-in-us/

In practice, in Utah, individuals will be able to use gold and silver bullion in the same way as they would cash for transactions but also for currency exchanges. Individuals with the metal will be able to get fair market value in a trade for cash, or may start depositing or paying with it. The state will also be offering a one-time tax credit to offset any capital gains taxes accrued for individuals who choose to trade metal for paper.

The tax credit essentially ensures that the exchange works like any other currency exchange, say if someone went to Europe and needed to get Euros around that trip. It will also eliminate a shadow market for the metal as those with metal to exchange would normally call around for transaction prices in order to offset fees and taxes.


9 posted on 03/19/2014 4:03:06 PM PDT by HangnJudge
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To: Lorianne

Federal reserve notes are no longer even an IOU as there is nothing they owe you.

Federal reserve notes are 100% fiat currency based on nothing with nothing backing them.


10 posted on 03/19/2014 4:08:32 PM PDT by CodeToad (Keeping whites from talking about blacks is verbal segregation!)
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To: SVTCobra03

How are the $20s in my wallet debt?


11 posted on 03/19/2014 4:17:36 PM PDT by Toddsterpatriot (Science is hard. Harder if you're stupid.)
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To: CodeToad

The Fed owns over $4 trillion in guaranteed bonds.


12 posted on 03/19/2014 4:19:17 PM PDT by Toddsterpatriot (Science is hard. Harder if you're stupid.)
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To: Toddsterpatriot

Bonds are nothing but more promises to pay. They, too, are rarely backed by anything.


13 posted on 03/19/2014 4:20:07 PM PDT by CodeToad (Keeping whites from talking about blacks is verbal segregation!)
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To: CodeToad
It's true, the FRNs are backed by trillions in bonds. Bonds paying nearly $100 billion a year in interest. Not too shabby compared to your original claim.
14 posted on 03/19/2014 4:26:56 PM PDT by Toddsterpatriot (Science is hard. Harder if you're stupid.)
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To: CodeToad

—They, too, are rarely backed by anything.

Other than the full Faith and Honor of the
Entity that Created the Bonds

Whatever that is worth.


15 posted on 03/19/2014 4:27:33 PM PDT by HangnJudge
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To: Lorianne

Where is von Mises when you need him?


16 posted on 03/19/2014 5:01:10 PM PDT by cornelis
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To: Toddsterpatriot

“Bonds paying nearly $100 billion a year in interest. Not too shabby compared to your original claim. “

My original claim sands. FRNs are backed by nothing but more FRNs. They are backed by nothing.


17 posted on 03/19/2014 5:03:45 PM PDT by CodeToad (Keeping whites from talking about blacks is verbal segregation!)
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To: CodeToad
Bonds paying nearly $100 billion a year in interest. Not too shabby compared to your original claim.

My original claim sands. FRNs are backed by nothing but more FRNs. They are backed by nothing.

Yes. As long as you ignore more than $4 trillion in bonds and the $100 billion in annual interest they earn, FRNs are backed by nothing. Don't forget to ignore the over $300 billion in gold as well.

18 posted on 03/19/2014 5:18:20 PM PDT by Toddsterpatriot (Science is hard. Harder if you're stupid.)
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To: Toddsterpatriot

http://www.youtube.com/playlist?list=PL3E96F9D3D88EC603


19 posted on 03/19/2014 5:18:52 PM PDT by SVTCobra03 (You can never have enough friends, horsepower or ammunition.)
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To: SVTCobra03

Thanks. Did any of that show how my $20s are debt?


20 posted on 03/19/2014 5:44:02 PM PDT by Toddsterpatriot (Science is hard. Harder if you're stupid.)
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To: SVTCobra03

“Bitcoin has no intrinsic value and can disappear into the ethernet in one keystroke.”

Dollars have no intrinsic value and can disappear in a fire or can be seized by a number of Federal agencies at the stroke of a key.


21 posted on 03/19/2014 5:56:00 PM PDT by aMorePerfectUnion
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To: Lorianne
Just consider what might happen if mortgage holders realised the money the bank lent them is not, really, the life savings of some thrifty pensioner, but something the bank just whisked into existence through its possession of a magic wand which we, the public, handed over to it.

I guess they could default, and get foreclosed. Or continue paying.

Of course, in the US, banks are lending trillions to our Central Bank, not borrowing.

22 posted on 03/19/2014 6:03:58 PM PDT by Toddsterpatriot (Science is hard. Harder if you're stupid.)
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To: Toddsterpatriot

“Don’t forget to ignore the over $300 billion in gold as well. “

The gold is the ONLY backing. Promises of more promises is just plain stupid to think as backing. So, $300 billion versus the $17 trillion owed. I am not so sure a bank would accept a $300 item to secure a $17,000 debt.


23 posted on 03/19/2014 6:39:24 PM PDT by CodeToad (Keeping whites from talking about blacks is verbal segregation!)
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To: CodeToad
Promises of more promises is just plain stupid to think as backing.

Right. Because $4 trillion worth of stuff that pays $100 billion a year in interest is meaningless. LOL!

So, $300 billion versus the $17 trillion owed.

The Fed doesn't owe $17 trillion.

24 posted on 03/19/2014 7:38:33 PM PDT by Toddsterpatriot (Science is hard. Harder if you're stupid.)
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To: MeganC

“the Federal Reserve promissory notes people carry around in their wallets”.

I don’t know that promissory notes is an accurate description. That would imply that they could be exchanged for “real” money or specie, and in our current monetary regime FRNs are the real money.

Federal Reserve Notes more closely resemble the “bank money” or “credit money” that private banks created before the Federal Reserve existed. “Credit money” was unbacked currency that constituted the credit portion of the money supply during the gold standard. It was created by banks, often against “real bills”- google “real bills doctrine” and you’ll get an idea of what that is all about.

FRNs also resemble Greenbacks or US Notes which were another unbacked currency issue that circulated during the gold standard. There was plenty of unbacked money circulating during the gold standard- it essentially was the portion of the American money supply that disappeared when banks failed during the Depression, and the disappearance of this money is what created the massive deflation of that time.


25 posted on 03/19/2014 9:07:11 PM PDT by Pelham (If you do not deport it is amnesty by default.)
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