Financial Armageddon!!

[Perry]

I don't think you understand the word 'redeemable.'

.... one of the problems with wikipedia is the fact that
anybody can contribute even complete morons.

And that differs how from a web site like PropertyTalk?

As for your last point, it seems to me that the posit from
many is the government only appears to control it, when,
in reality, it doesn't. The USA Federal Reserve would be
a good example.

[Mark_B]

He kicked his campaign off on the 20th of October by submitting a formal complaint to the Commerce Commission, in conjunction with 24 pages of supporting evidence regarding the $12 billion a year the New Zealand government is paying out as interest on overseas debt, on the grounds that the money the government borrowed was created out of thin air. This form of banking is by its nature destructive, as it can only lead into ever increasing indebtedness, he says.

Oh, wait...... I've heard this joke before....


It goes something like this....



It all started with my friend John. He had $100, and I had a nice big safe, so he asked me to store it for him.

Next thing I know, my friend Bob asked me if he could borrow $90. I'm a kind person, so of course I said yes, and took the $90 out of the safe.

Of course Bob being Bob, he spent the lot down the pub that very night

Bob wasn't so happy, but my friend Ken the landlord was, and he came by the next morning and asked me to keep it safely for him in my safe.

Well word must have been getting round that I'm a soft touch, so blow me down if another friend Mick didn't ask for a loan. This time he only wanted $81, so I open the safe again.

I knew that was a mistake. He's had this long-term gambling problem, and guess where the money went. Yep that's right, right into Dave the bookies pocket.

He's a careful chap, and asked me to keep it safe for him.

Then Pete asked for a loan. Only $72.90. I'm obviously too soft, but I give it to him from the money in the safe.

He's got quite a big family, and spent the lot at the local grocers. Ted the grocer came round that evening and asked me to put it in my safe.


At this point I thought I'd better start keeping some notes of all this. I'm starting to forget who borrowed what

Now, lets see, I started with $100 from John.

I've lent out:
$90 to my friend Bob.
$81 to Mick.
$72.90 to Pete.

So altogether I've lent out $243.90. And that's the total debt owed.
Hmmm, that's odd, because I only started with $100 ?(

But what do my various friends think they have now?

Well John thinks he has that original $100.
And Ken the landlord has $90.
And Dave the bookie has $81.
And finally, Ted the grocer has $72.90.

So all up, that's $343.90.

And they say you can't make money for nothing

I just hope my friends don't all turn up at once asking for their money back, or I'm going to get beaten up. I've just looked, and I still only have $100 in the safe

Does anyone want to borrow some money ?

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

But here's the punchline that was somehow omitted from the joke....

******

I've lent out:
$90 to my friend Bob.
$81 to Mick.
$72.90 to Pete.


Yes, but in return you owe:

$100 to John
$90 to Ken
$81 to Dave, and
$72.90 to Ted.

They cancel each other out except for the $100 you owe John, which still happens to be sitting in your safe.

Even 17 year old's studying economics at high school learn about the multiplier.

Sssshhh... a little secret.... even if the currency was backed by gold or silver or paua shells or vodka (or whatever), the multiplier would still be an issue unless you tightened the reserve requirements such that every dollar lent had to be backed by an equivalent amount in an approved security (ergo you restrict the money supply greatly).

But say they did tighten the reserve requirements (to the hilt) - that would effectively stop the creation of money that was not backed by the equivalent amount of security (by consigning the multiplier to the history books) - ergo it would restrict the money supply.

What happens to the price of something when (other things being equal) it's supply is greatly restricted - it becomes alot more expensive.

And NZers are starting to whinge about interest rates at only 10%!*

They'd be waaaaaaaay higher with the money supply restricted.

*When I posted that originally on PT it was May 2008 (hence the reference to interest rates at 10%)

[Mark_B]

Incidentally, the system of fractional reserve banking isn't to blame for NZ's indebtedness to the world.

What is to blame (and I am being very blunt here) is that NZers can't save for shit and love to borrow money far over and above what they earn to buy all sorts of useless crap that loses value.

[spaceman]

Redeemable

I don't think you understand the word 'redeemable.'
And that differs how from a web site like PropertyTalk?

As for your last point, it seems to me that the posit from
many is the government only appears to control it, when,
in reality, it doesn't. The USA Federal Reserve would be
a good example.

Pretty sure I do understand what redeemable means.... I'm interested to hear what you think it means.

I like this version...capable of being exchanged for or replaced by something of equal value..... EG: I redeemed some of my cash for cheese....mmmmmm cheese. The idiot from wikipedia said

This money is not redeemable for any kind of valuable commodity

..... maybe he is the one who has the problem with the word as I daily exchange my money for all sorts of stuff.

My point about wikipedia was more along the lines is that it keeps getting quoted like it is the ultimate authority on all things.... ie if it's on wikipedia it must be true. Not many people holding PT up as the same kind of oracle.

Control???? who really controls what??? Some say that the people control the government others say the government controls the people ..... tricky question that one, for lots of reasons.

Cheers
Spaceman

[Austrokiwi]

What is to blame (and I am being very blunt here) is that NZers can't save for shit and love to borrow money far over and above what they earn to buy all sorts of useless crap that loses value.

I agree.

Also in regards to your earlier post People seem to want to blame the monetary system for the current problems yet fail to realise that the current problems would have occurred under a specie based monetary system. Basically the problem was unrestricted greed and an ignorance and ignoring of Risk.

[Perry]

In the context, I see redeemable as going to the issuer
(e.g. RBNZ) and getting some gold or silver or the like.

Wikipedia or Citizendium or whatever are just sources
of information, no more. Innuendoes that imply all the
contributors are morons, in the absence of evidence
refuting what's stated, is what, exactly? Ad hominem?

[spaceman]

Still doesn't make him any less of an idiot ....

In the context, I see redeemable as going to the issuer
(e.g. RBNZ) and getting some gold or silver or the like.

Ok taking that context the wiki guy wants to be able to redeem his money to the issuer for what purpose???.... lets see, lets take some money ( which is nice and convenient) and redeem it back to the issuer for something that isn't money but has some value and is a whole lot less convenient..... doesn't make a whole lot of sense to me.

Also why the issuer??? ....surely he should ask his employer to stop paying him with that bad money stuff since it is unredeemable and get paid with valuable commodities instead????

Wikipedia or Citizendium or whatever are just sources
of information, no more. Innuendoes that imply all the
contributors are morons, in the absence of evidence
refuting what's stated, is what, exactly? Ad hominem?

I didn't imply that all the contributers were morons, just that that guy was. The wiki guy stating that all money is now bad money is proof enough for me that he is a moron. Of course everbody is entitled to their own opinion.

Cheers
Spaceman

[brendan]

Ok taking that context the wiki guy wants to be able to redeem his money to the issuer for what purpose???.... lets see, lets take some money ( which is nice and convenient) and redeem it back to the issuer for something that isn't money but has some value and is a whole lot less convenient..... doesn't make a whole lot of sense to me.

Also why the issuer??? ....surely he should ask his employer to stop paying him with that bad money stuff since it is unredeemable and get paid with valuable commodities instead????

This is what I understand.

In the olden days, people carried around these gold coins.
Gold coins were heavy.
Banks said, we will look after your gold and give you an IOU note.

Here are some examples of IOU notes:

In 1905, it mentions that the note is payable in gold coin on demand.


In 1929, notice that it says this is not $20 dollars, it's an IOU note for $20.

[spaceman]

and your point is.....

This is what I understand.

In the olden days, people carried around these gold coins.
Gold coins were heavy.
Banks said, we will look after your gold and give you an IOU note.

Here are some examples of IOU notes:

In 1905, it mentions that the note is payable in gold coin on demand


In 1929, notice that it says this is not $20 dollars, it's an IOU note for $20.

...what exactly???

Cheers
Spaceman

[Perry]

Ok taking that context the wiki guy
wants to be able to redeem his money
to the issuer for what purpose???

You can't or wont get it - I accept that.
Same as for the Encyclopaedia Britannica
quote in the Currency Contortion thread:
they're wrong and you're right. Have
you had a reply from them, after telling
them about the error?

Paper money once had a precious
commodity backing. Notes were
inscribed something like:
The RBNZ promises to pay upon
demand . . . (from the days of
specie-back currency).

I didn't imply that all the contributors were
morons, just that that guy was. The wiki
guy stating that all money is now bad
money is proof enough for me that he is
a moron. Of course everybody is entitled
to their own opinion.

Of course. Some people adduce reasonable
evidence to support their view, however.

[spaceman]

Way to not answer the question I asked

You can't or wont get it - I accept that.
Same as for the Encyclopaedia Britannica
quote in the Currency Contortion thread:
they're wrong and you're right. Have
you had a reply from them, after telling
them about the error?

ummm i said the banks don't create money in that thread and so did Encyclopaedia Britannica .... I'm right and they're right. You wouldn't answer some of the questions I asked in that thread as well.

once again what is the purpose of redeeming the money for a valuable commodity with the issuer of the money????

Paper money once had a precious
commodity backing. Notes were
inscribed something like:
The RBNZ promises to pay upon
demand . . . (from the days of
specie-back currency).

.... once upon a time back in the olden days lots of things were thought to be good ideas and collectively most of us have decided that many of them weren't such good ideas, slavery for example .... gold backed money for another.....women wearing shoulder pads with t-shirts another.... I could go on.

Can you provide a sensible reason that money should be backed by gold other than the catch cry of that's how they used to do it????

Of course. Some people adduce reasonable
evidence to support their view, however.

... and what is your view exactly????

cheers
spaceman

[Perry]

ummm i said the banks don't create money in that thread
and so did Encyclopaedia Britannica .... I'm right and they're
right. You wouldn't answer some of the questions I asked
in that thread as well.

Wrong. The Encyclopaedia Britannica quote said this:

Although no individual bank created money, the system
as a whole did. This multiple expansion process lies at
the heart of the modern monetary system.

My view and that of others was that the 'system'
referred to in the Encyclopaedia Britannica quote
was the banking system, or the banks, collectively.

You said that was wrong also and you were invited
to communicate with the Encyclopaedia Britannica
requesting it to amend that entry. Did you do so?
(At the time, you described it as a bad bit of writing)

once again what is the purpose of redeeming the money
for a valuable commodity with the issuer of the money????

That's a red herring. Wasn't it the author of the article
who made the point that you disputed? Ask him what
his point was - how could I know?

Do let us know when you get your reply from the
erroneous folks at Encyclopaedia Britannica, wont
you. That will be a feather in your cap.

.... once upon a time back in the olden days lots of
things were thought to be good ideas and collectively
most of us have decided that many of them weren't
such good ideas, gold backed money for example....

Most of us? When and where was the referendum
or vote held in which most of us made that decision?
I forget . . .

[Austrokiwi]

the dollar

I have been doing some reading on the History of the US$ what surprised me ( I suppose it shouldn't have) is the messy way the US$ started. When the first monetary legislation was enacted it was decided that the US$ should be of exactly the same standard as the Mexican (pillar dollar), with poor technology the first dollars ended up being a lower standard than the Mexican. the US$ was slow to be established the Mexican dollar circulated legally until the 1850s. The US produced two forms of the dollar 1 silver one gold. As trade with China picked up ( and the east India Company lost its monopoly) it was found that the US silver dollar ( because of its lower silver content) was only accepted at a discount. To remedy the situation a trade dollar was issued that was of the same standard as the Mexican dollar........for about 6 years this coin was issued for trade.......... it created mayhem when it entered the US domestic market.......two US silver dollars were available one each of a different silver standard. To rectify the situation the Trade dollar was legally excluded from the domestic market.......then demonetarised.


I find it interesting that some want to return to a specie based currency. I can not understand the reasons for doing so apart from lets go back to the good old days. They weren't that good: To return to a specie standard there would have to be a decision as to what weight of specie will equal the basic monetary unit. If it were gold are we going to have 1/1100th oz of gold = US$1.00 ( in NZ 1/1500thoz). we are still going to want to carry bank notes around with us..... how will we know that the government will have the requisite ammount of gold or silver in storage to back the notes? What happens when the government wants to increase the circulating money supply, the preferred technique of rulers is to debase the coinage, creating inflation.

In effect the same problems the gold bugs have now with legal tender will occur under a specie currency.

In the end it doesn't matter whether our money is gold silver, paper polymer or bottle tops. What is important is the fiscal responsibility of the government and bankers. The current mess was not created by the money we use but the use we put that money to.

[muppet]

A comment I came across.....

Rises in house prices within economically important areas (Akl, Wel, Chch) and limited land for suitable development (RM Act), and finally increases in living expenses (ACC levy hikes, power and phone co hikes), decreases in export earnings (after the crunch in buyer markets), all combine with one more fundamental - salaries throughout NZ have not effectively risen since 2007, three years ago.
The inevitable then occurs - a REAL recession in New Zealand, which will surely bring more ruin than the Great Depression. Let us hope it does not come to pass...but the writing is on the wall for us, we have been exampled by the US and UK, who, like us, were borrowing to the very hilt

http://www.nbr.co.nz/article/auckland-house-prices-hit-new-high-114432#comments

[Bob Kane]

A comment I came across.....

Bernard Hickey?
Or someone trying to outdo him?