Rallo & Bagus have already had debates directly which u can check out. I personally don’t think Bagus properly represents Rallo. In his substack he responds to a lot of Bagus’ criticisms but unfortunately a lot of his work is locked away by being in Spanish.
If the bills are subjectively counted as „money“ or not is irrelevant. Cash holdings over the current year, i.e. „hoards“ are of course „savings“. Savings in economics is a very problematical notion. „Real savings“, those that really provide the function that economic theory says that it does is only „real investment“, i.e. new machines, stocks of goods, inventory and the like. The doctrine that only „real savings“ ( whatever that should mean) permit real investment is wrong anyway. When the scale of the investment sector is fixed and given the maximal aggregate output of consumption goods is fixed as well - under conditions of absolute full employment, which is normally equally wrong. The larger part of investment is financed out if corporate savings, i.e. profits. Do you think that is a heroic act of abstaining from consumption? The rest, if there is any, of investment is financed by bank credit, so the banking sector saves which is clearly nonsense. Bank credits again have nothing to do and absolutely do not depend on household savings. Banks c r e a t e n e w money by credit operations ( alternatively by bying financial or real assets). The private savings of household actually play a very, very minor role, I would argue they are completely irrelevant in normal times. The „importance of savings“ is ideology, savings depend on investment and thats it. S=I, and I determines S. Unfortunately, the old and new Austrians build their justification of private property and private enterprise heavily on the savings theory. The savings theory is wrong though and its really not that difficult to find that out. You have to justify private enterprise by far more relevant considerations.
@@lowersaxon ur conflating a lot of different issues, it doesn’t seem like ur very familiar with Austrian theory. Just to answer ur comments on savings & investment, in order to expand investment there have to be enough consumer & capital goods at the right prices to sustain the investment project, i.e., there need to be previous savings, we can’t consume the entire product if we wish not only to expand the structure of production but to maintain the current structure as well. However, once intermediaries, like banks, are added to the equation there is an even greater ability to disconnect investment from savings, yes, u can invest before u save, but the entire Austrian proposition of the business cycle is that this is exactly what induces the boom & the inevitable bust. Such investment is unsustainable.
I don’t wish to be disrespectful but the way in which Bagus’ represents Rallo as some kind of crank that doesn’t understand anything about Austrian economics is a bit frustrating. Rallo nowhere denies that real previous savings are needed to healthily invest. He’s very well versed in Austrian theory having learned under De Soto like Bagus himself. The way I view Rallo’s argument is that the act of first a person withholding consumption (creating real savings), then going to a bank with their savings & giving them to the bank in exchange for bank liabilities (bank notes, checking account) & subsequently holding these liabilities is what allows the bank to fund the investment into real bills. Rallo’s point is that this is no different than the CD scenario Bob conjures up, the only difference is a qualitative one, that being that these bank liabilities have no specified terms like a CD or a stock or a bond & that people treat them as money themselves. Even when the original saver spends this bank liability on goods there is no reduction in savings so long as the liability is still held much like what happens with stocks or bonds where there is simply a change of ownership but no reduction in savings. However, the point of banks operating on the real bills doctrine under fractional reserves is so that they match in maturity & risk short term savings provided to them with short term investments they make such that there are no distortions en masse as in the typical ABCT case. If the banking system engages in the practice of borrowing short & lending long though then we do see the same issues arising from the traditional ABCT.
I think the point is that simply because you have an asset that you don't spend or realise, that is not necessarily withholding consumption. "Savings is a flow, not a stock", he says. So allowing lending secured by assets can create market distortions.
@@rocketpig1914 it is the same as with a CD, bond, or stock, so long as you hold the asset you are withholding consumption, you don’t need to forego the purchasing power in order to save, all that does is make the asset less liquid, if someone else is holding it then they too are withholding consumption, if they are holding it they aren’t spending. You don’t need to not be able to spend, all that does is lower your liquidity, & that may be desirable for a saver.
@@rocketpig1914I thought I replied but maybe I never hit send. Of course it is withholding of consumption. In order to acquire & hold the liability of the bank u have to not spend it, so long as u do not spend it u personally are withholding consumption & thus creating the Striglian subsistence fund which supports the productive endeavors of investment (u are not consuming what is needed to be consumed until the end of production is reached). You don’t have to permanently give up purchasing power for it to be savings, that’s simply foregoing liquidity. Think of Crusoe, when he accumulates coconuts is he ever prevented from being able to consume them at any moment’s notice. No, & yet they are still savings he can use to embark on productive endeavors. Now if he knows that he may at any moment want to consume from these savings then this will be a restriction as to the type of productive endeavors he can embark on. If he wants to expand the structure of production further into the future he will have to commit & not dig into his savings whenever he feels but only up to the limit needed to complete his project. The only difference is the short term character of this liability over others & this is simply a desire by customers to also maintain they’re liquidity, that’s why these are treated as on par with money. Because of the quality of these savings, however, the only way to make investments that aren’t distortionary to the structure of production is to fund short term investments through commercial paper which are “self liquidating” as they produce highly salable goods. This not only helps maintain monetary equilibrium (money demand = money supply) but also maintains intertemporal equilibrium (matching of time preference, liquidity preference, & risk preference between savers & investors). If we use these short term savings to fund long term investments we are ex ante producing discoordination in the market, similar to 2008 where the overnight repo market was essentially funding the mortgage market.
@@rocketpig1914 It’s not the holding of an asset that is the savings but the holding of the bank liabilities that is the savings. By holding them, u are not spending them & thus setting aside a subsistence fund for a short term that can be used to fund short term projects through commercial paper.
I thought this was an excellent interview and extremely educational. Question: Is Philipp's contention that holding a cash balance is not counted as savings but if one buys a real bill with cash then one is engaged in savings?
@@dasherman5150 the general rothbardian view is that cash balances only count as savings if the purchasing power is completely foregone, i.e., you purchase an interest bearing asset like a time deposit, stock, invest directly into the capital structure, etc In reality there’s no need to forego purchasing power in order for savings to be considered as such, savings is merely a foregoing of consumption, whether those savings are invested in CDs, direct investment, stocks, a real bill, or a banks own liabilities (debt at sight, demand obligation, debt on demand, or whatever u want to call it, essentially what a fractional reserve “deposit” is) These are all investments of different risk, liquidity, & time preference profiles that ought to be matched with people’s savings profiles, i.e., their risk, liquidity, & time preferences such that, for example, savings of 3 month duration isn’t invested in say 30 year mortgages, which is the practice of borrowing short & lending long that plagues our system. Sure, intermediaries can theoretically roll over the debt, but, first, this is fixing an ex ante problem or disparity between savings & investment ex post, and, second, if the entire system engages in this practice, there is no guarantee that u will be able to find someone else to help roll over which can ultimately lead to a liquidity crisis as debts need to be paid, cannot be rolled over, & investments will not yield a timely return which will induce liquidation of many projects (the beginning of the downturn). Of course the whole typical ABCT explanation fits into this I don’t want to belabor that as many of us in the audience are familiar with it.
@@dasherman5150 The typical rothbardian view is that in order for savings to count purchasing power has to be foregone. However, this is not really the case, savings is merely the foregoing of consumption. Whether those savings are invested in CDs, bonds, stocks, real bills, or banks’ own liabilities (demand obligations, debt at sight, debt on demand; essentially what fractional reserve “deposits” are) mere reflects that character of those savings & individuals’ preferences. These are all investments of different risk, liquidity, & time preference profiles that ought to be matched with people’s savings profiles, i.e., their risk, liquidity, & time preferences such that, for example, savings of 3 month duration isn’t invested in say 30 year mortgages, which is the practice of borrowing short & lending long that plagues our system. Sure, intermediaries can theoretically roll over the debt, but, first, this is fixing an ex ante problem or disparity between savings & investment ex post, and, second, if the entire system engages in this practice, there is no guarantee that u will be able to find someone else to help roll over which can ultimately lead to a liquidity crisis as debts need to be paid, cannot be rolled over, & investments will not yield a timely return which will induce liquidation of many projects (the beginning of the downturn). Of course the whole typical ABCT explanation fits into this I don’t want to belabor that as many of us in the audience are familiar with it.
The typical rothbardian view is that in order for savings to count purchasing power has to be foregone. However, this is not really the case, savings is merely the foregoing of consumption. Whether those savings are invested in CDs, bonds, stocks, real bills, or banks’ own liabilities (demand obligations, debt at sight, debt on demand; essentially what fractional reserve “deposits” are) mere reflects that character of those savings & individuals’ preferences. These are all investments of different risk, liquidity, & time preference profiles that ought to be matched with people’s savings profiles, i.e., their risk, liquidity, & time preferences such that, for example, savings of 3 month duration isn’t invested in say 30 year mortgages, which is the practice of borrowing short & lending long that plagues our system. Sure, intermediaries can theoretically roll over the debt, but, first, this is fixing an ex ante problem or disparity between savings & investment ex post, and, second, if the entire system engages in this practice, there is no guarantee that u will be able to find someone else to help roll over which can ultimately lead to a liquidity crisis as debts need to be paid, cannot be rolled over, & investments will not yield a timely return which will induce liquidation of many projects (the beginning of the downturn). Of course the whole typical ABCT explanation fits into this I don’t want to belabor that as many of us in the audience are familiar with it.
The typical rothbardian view is that in order for savings to count purchasing power has to be foregone. However, this is not really the case, savings is merely the foregoing of consumption. Whether those savings are invested in CDs, bonds, stocks, real bills, or banks’ own liabilities (demand obligations, debt at sight, debt on demand; essentially what fractional reserve “deposits” are) mere reflects that character of those savings & individuals’ preferences. These are all investments of different risk, liquidity, & time preference profiles that ought to be matched with people’s savings profiles, i.e., their risk, liquidity, & time preferences such that, for example, savings of 3 month duration isn’t invested in say 30 year mortgages, which is the practice of borrowing short & lending long that plagues our system. Sure, intermediaries can theoretically roll over the debt, but, first, this is fixing an ex ante problem or disparity between savings & investment ex post, and, second, if the entire system engages in this practice, there is no guarantee that u will be able to find someone else to help roll over which can ultimately lead to a liquidity crisis as debts need to be paid, cannot be rolled over, & investments will not yield a timely return which will induce liquidation of many projects (the beginning of the downturn). Of course the whole typical ABCT explanation fits into this I don’t want to belabor that as many of us in the audience are familiar with it.
The typical rothbardian view is that in order for savings to count purchasing power has to be foregone. However, this is not really the case, savings is merely the foregoing of consumption. Whether those savings are invested in CDs, bonds, stocks, real bills, or banks’ own liabilities (demand obligations, debt at sight, debt on demand; essentially what fractional reserve “deposits” are) mere reflects that character of those savings & individuals’ preferences. These are all investments of different risk, liquidity, & time preference profiles that ought to be matched with people’s savings profiles, i.e., their risk, liquidity, & time preferences such that, for example, savings of 3 month duration isn’t invested in say 30 year mortgages, which is the practice of borrowing short & lending long that plagues our system. Sure, intermediaries can theoretically roll over the debt, but, first, this is fixing an ex ante problem or disparity between savings & investment ex post, and, second, if the entire system engages in this practice, there is no guarantee that u will be able to find someone else to help roll over which can ultimately lead to a liquidity crisis as debts need to be paid, cannot be rolled over, & investments will not yield a timely return which will induce liquidation of many projects (the beginning of the downturn). Of course the whole typical ABCT explanation fits into this I don’t want to belabor that as many of us in the audience are familiar with it.
It's hard to believe that these two are PhD! I am self taught and can not only explain this better but also have a better understanding of this topic at hand,......if I ever complete my book every person with a average intelligence will understand this topic.
Doesn't anyone understand bookkeeping? The bank can only loan federal reserve notes on hand; it cannot counterfeit cash and then loan out the counterfeit. You are discussing a "system" in which each bank prints its own "money" when a loan is made.
You are right in the sense of the private individual. This is how I understand the system works. If I take $1K of my paycheck, deposit it in my savings account, now the bank has a $1000.00 liability because I can withdraw it on demand. Let's say the government/FED decides the bank can legally loan $900.00 of that $1K. So now my neighbor needs a $900.00 loan. He goes to the bank, the banker says he can loan $900 for 10 months, at $100.00/month. They write the loan, now the bank has a $1000 asset, the loan, and my neighbor has a $1000 liability. So long as I keep my savings in the bank for the ten months, and my neighbor pays back the loan, all is well. If I withdraw my savings on demand, or if my neighbor defaults, the bank has problems. So I preach to anyone who would listen, to pay everything off. However folks seem to just take on more and more debt, they'll never be able to pay off.
You're right that the commercial bank can't counterfeit cash. But it can grant a loan in the form of a checking account deposit, which typically trades at par with cash. This is why people say "banks create money" (in a fractional reserve system) when they grant new loans. This isn't some weird Rothbardian view; every school of thought acknowledges this. (Some groups might think it's good and some might think it's bad, but they all agree it happens.)
@@paulburbank8652 They aren't counterfeiting cash. (There is no cash because there is no market money.) They are counterfeiting credit, or, rather, extending fraudulent credit.
Really enjoyed Dr Bagus' book on deflation.
Great episode. Thanks!
Great interview.
Keith Weiner of Monetary Metals received his PhD from Fekete. I wonder if you could stage a debate.
Rallo & Bagus have already had debates directly which u can check out. I personally don’t think Bagus properly represents Rallo. In his substack he responds to a lot of Bagus’ criticisms but unfortunately a lot of his work is locked away by being in Spanish.
If the bills are subjectively counted as „money“ or not is irrelevant. Cash holdings over the current year, i.e. „hoards“ are of course „savings“. Savings in economics is a very problematical notion. „Real savings“, those that really provide the function that economic theory says that it does is only „real investment“, i.e. new machines, stocks of goods, inventory and the like. The doctrine that only „real savings“ ( whatever that should mean) permit real investment is wrong anyway. When the scale of the investment sector is fixed and given the maximal aggregate output of consumption goods is fixed as well - under conditions of absolute full employment, which is normally equally wrong. The larger part of investment is financed out if corporate savings, i.e. profits. Do you think that is a heroic act of abstaining from consumption? The rest, if there is any, of investment is financed by bank credit, so the banking sector saves which is clearly nonsense. Bank credits again have nothing to do and absolutely do not depend on household savings. Banks c r e a t e n e w money by credit operations ( alternatively by bying financial or real assets). The private savings of household actually play a very, very minor role, I would argue they are completely irrelevant in normal times. The „importance of savings“ is ideology, savings depend on investment and thats it. S=I, and I determines S. Unfortunately, the old and new Austrians build their justification of private property and private enterprise heavily on the savings theory. The savings theory is wrong though and its really not that difficult to find that out. You have to justify private enterprise by far more relevant considerations.
@@lowersaxon ur conflating a lot of different issues, it doesn’t seem like ur very familiar with Austrian theory. Just to answer ur comments on savings & investment, in order to expand investment there have to be enough consumer & capital goods at the right prices to sustain the investment project, i.e., there need to be previous savings, we can’t consume the entire product if we wish not only to expand the structure of production but to maintain the current structure as well. However, once intermediaries, like banks, are added to the equation there is an even greater ability to disconnect investment from savings, yes, u can invest before u save, but the entire Austrian proposition of the business cycle is that this is exactly what induces the boom & the inevitable bust. Such investment is unsustainable.
I don’t wish to be disrespectful but the way in which Bagus’ represents Rallo as some kind of crank that doesn’t understand anything about Austrian economics is a bit frustrating. Rallo nowhere denies that real previous savings are needed to healthily invest. He’s very well versed in Austrian theory having learned under De Soto like Bagus himself. The way I view Rallo’s argument is that the act of first a person withholding consumption (creating real savings), then going to a bank with their savings & giving them to the bank in exchange for bank liabilities (bank notes, checking account) & subsequently holding these liabilities is what allows the bank to fund the investment into real bills. Rallo’s point is that this is no different than the CD scenario Bob conjures up, the only difference is a qualitative one, that being that these bank liabilities have no specified terms like a CD or a stock or a bond & that people treat them as money themselves. Even when the original saver spends this bank liability on goods there is no reduction in savings so long as the liability is still held much like what happens with stocks or bonds where there is simply a change of ownership but no reduction in savings. However, the point of banks operating on the real bills doctrine under fractional reserves is so that they match in maturity & risk short term savings provided to them with short term investments they make such that there are no distortions en masse as in the typical ABCT case. If the banking system engages in the practice of borrowing short & lending long though then we do see the same issues arising from the traditional ABCT.
I think the point is that simply because you have an asset that you don't spend or realise, that is not necessarily withholding consumption. "Savings is a flow, not a stock", he says. So allowing lending secured by assets can create market distortions.
@@rocketpig1914 it is the same as with a CD, bond, or stock, so long as you hold the asset you are withholding consumption, you don’t need to forego the purchasing power in order to save, all that does is make the asset less liquid, if someone else is holding it then they too are withholding consumption, if they are holding it they aren’t spending. You don’t need to not be able to spend, all that does is lower your liquidity, & that may be desirable for a saver.
@@rocketpig1914I thought I replied but maybe I never hit send. Of course it is withholding of consumption. In order to acquire & hold the liability of the bank u have to not spend it, so long as u do not spend it u personally are withholding consumption & thus creating the Striglian subsistence fund which supports the productive endeavors of investment (u are not consuming what is needed to be consumed until the end of production is reached). You don’t have to permanently give up purchasing power for it to be savings, that’s simply foregoing liquidity. Think of Crusoe, when he accumulates coconuts is he ever prevented from being able to consume them at any moment’s notice. No, & yet they are still savings he can use to embark on productive endeavors. Now if he knows that he may at any moment want to consume from these savings then this will be a restriction as to the type of productive endeavors he can embark on. If he wants to expand the structure of production further into the future he will have to commit & not dig into his savings whenever he feels but only up to the limit needed to complete his project. The only difference is the short term character of this liability over others & this is simply a desire by customers to also maintain they’re liquidity, that’s why these are treated as on par with money. Because of the quality of these savings, however, the only way to make investments that aren’t distortionary to the structure of production is to fund short term investments through commercial paper which are “self liquidating” as they produce highly salable goods. This not only helps maintain monetary equilibrium (money demand = money supply) but also maintains intertemporal equilibrium (matching of time preference, liquidity preference, & risk preference between savers & investors). If we use these short term savings to fund long term investments we are ex ante producing discoordination in the market, similar to 2008 where the overnight repo market was essentially funding the mortgage market.
@@rocketpig1914 It’s not the holding of an asset that is the savings but the holding of the bank liabilities that is the savings. By holding them, u are not spending them & thus setting aside a subsistence fund for a short term that can be used to fund short term projects through commercial paper.
I thought this was an excellent interview and extremely educational.
Question:
Is Philipp's contention that holding a cash balance is not counted as savings but if one buys a real bill with cash then one is engaged in savings?
@@dasherman5150 the general rothbardian view is that cash balances only count as savings if the purchasing power is completely foregone, i.e., you purchase an interest bearing asset like a time deposit, stock, invest directly into the capital structure, etc
In reality there’s no need to forego purchasing power in order for savings to be considered as such, savings is merely a foregoing of consumption, whether those savings are invested in CDs, direct investment, stocks, a real bill, or a banks own liabilities (debt at sight, demand obligation, debt on demand, or whatever u want to call it, essentially what a fractional reserve “deposit” is)
These are all investments of different risk, liquidity, & time preference profiles that ought to be matched with people’s savings profiles, i.e., their risk, liquidity, & time preferences such that, for example, savings of 3 month duration isn’t invested in say 30 year mortgages, which is the practice of borrowing short & lending long that plagues our system. Sure, intermediaries can theoretically roll over the debt, but, first, this is fixing an ex ante problem or disparity between savings & investment ex post, and, second, if the entire system engages in this practice, there is no guarantee that u will be able to find someone else to help roll over which can ultimately lead to a liquidity crisis as debts need to be paid, cannot be rolled over, & investments will not yield a timely return which will induce liquidation of many projects (the beginning of the downturn). Of course the whole typical ABCT explanation fits into this I don’t want to belabor that as many of us in the audience are familiar with it.
@@dasherman5150 The typical rothbardian view is that in order for savings to count purchasing power has to be foregone. However, this is not really the case, savings is merely the foregoing of consumption. Whether those savings are invested in CDs, bonds, stocks, real bills, or banks’ own liabilities (demand obligations, debt at sight, debt on demand; essentially what fractional reserve “deposits” are) mere reflects that character of those savings & individuals’ preferences. These are all investments of different risk, liquidity, & time preference profiles that ought to be matched with people’s savings profiles, i.e., their risk, liquidity, & time preferences such that, for example, savings of 3 month duration isn’t invested in say 30 year mortgages, which is the practice of borrowing short & lending long that plagues our system. Sure, intermediaries can theoretically roll over the debt, but, first, this is fixing an ex ante problem or disparity between savings & investment ex post, and, second, if the entire system engages in this practice, there is no guarantee that u will be able to find someone else to help roll over which can ultimately lead to a liquidity crisis as debts need to be paid, cannot be rolled over, & investments will not yield a timely return which will induce liquidation of many projects (the beginning of the downturn). Of course the whole typical ABCT explanation fits into this I don’t want to belabor that as many of us in the audience are familiar with it.
The typical rothbardian view is that in order for savings to count purchasing power has to be foregone. However, this is not really the case, savings is merely the foregoing of consumption. Whether those savings are invested in CDs, bonds, stocks, real bills, or banks’ own liabilities (demand obligations, debt at sight, debt on demand; essentially what fractional reserve “deposits” are) mere reflects that character of those savings & individuals’ preferences. These are all investments of different risk, liquidity, & time preference profiles that ought to be matched with people’s savings profiles, i.e., their risk, liquidity, & time preferences such that, for example, savings of 3 month duration isn’t invested in say 30 year mortgages, which is the practice of borrowing short & lending long that plagues our system. Sure, intermediaries can theoretically roll over the debt, but, first, this is fixing an ex ante problem or disparity between savings & investment ex post, and, second, if the entire system engages in this practice, there is no guarantee that u will be able to find someone else to help roll over which can ultimately lead to a liquidity crisis as debts need to be paid, cannot be rolled over, & investments will not yield a timely return which will induce liquidation of many projects (the beginning of the downturn). Of course the whole typical ABCT explanation fits into this I don’t want to belabor that as many of us in the audience are familiar with it.
The typical rothbardian view is that in order for savings to count purchasing power has to be foregone. However, this is not really the case, savings is merely the foregoing of consumption. Whether those savings are invested in CDs, bonds, stocks, real bills, or banks’ own liabilities (demand obligations, debt at sight, debt on demand; essentially what fractional reserve “deposits” are) mere reflects that character of those savings & individuals’ preferences. These are all investments of different risk, liquidity, & time preference profiles that ought to be matched with people’s savings profiles, i.e., their risk, liquidity, & time preferences such that, for example, savings of 3 month duration isn’t invested in say 30 year mortgages, which is the practice of borrowing short & lending long that plagues our system. Sure, intermediaries can theoretically roll over the debt, but, first, this is fixing an ex ante problem or disparity between savings & investment ex post, and, second, if the entire system engages in this practice, there is no guarantee that u will be able to find someone else to help roll over which can ultimately lead to a liquidity crisis as debts need to be paid, cannot be rolled over, & investments will not yield a timely return which will induce liquidation of many projects (the beginning of the downturn). Of course the whole typical ABCT explanation fits into this I don’t want to belabor that as many of us in the audience are familiar with it.
The typical rothbardian view is that in order for savings to count purchasing power has to be foregone. However, this is not really the case, savings is merely the foregoing of consumption. Whether those savings are invested in CDs, bonds, stocks, real bills, or banks’ own liabilities (demand obligations, debt at sight, debt on demand; essentially what fractional reserve “deposits” are) mere reflects that character of those savings & individuals’ preferences. These are all investments of different risk, liquidity, & time preference profiles that ought to be matched with people’s savings profiles, i.e., their risk, liquidity, & time preferences such that, for example, savings of 3 month duration isn’t invested in say 30 year mortgages, which is the practice of borrowing short & lending long that plagues our system. Sure, intermediaries can theoretically roll over the debt, but, first, this is fixing an ex ante problem or disparity between savings & investment ex post, and, second, if the entire system engages in this practice, there is no guarantee that u will be able to find someone else to help roll over which can ultimately lead to a liquidity crisis as debts need to be paid, cannot be rolled over, & investments will not yield a timely return which will induce liquidation of many projects (the beginning of the downturn). Of course the whole typical ABCT explanation fits into this I don’t want to belabor that as many of us in the audience are familiar with it.
If fiduciary media is less favorable than money, how come market participants created the eurodollar market?
Antal Fekete ❤ Read his books and watch his lectures before babbling on
It's hard to believe that these two are PhD!
I am self taught and can not only explain this better but also have a better understanding of this topic at hand,......if I ever complete my book every person with a average intelligence will understand this topic.
Great! Whats the title of your book?
@@goldspan5666 Do you have a bridge that I can buy?
wondering if you take your tv into a pawn shop and trade it for a tool of some kind, I think then the tv would count as savings
Who could have guessed that the demand for money has to exceed the supply, for it to work as money
@@stellanwolf3530 Demand always exceeds supply of economized goods.
Doesn't anyone understand bookkeeping? The bank can only loan federal reserve notes on hand; it cannot counterfeit cash and then loan out the counterfeit. You are discussing a "system" in which each bank prints its own "money" when a loan is made.
You are right in the sense of the private individual. This is how I understand the system works.
If I take $1K of my paycheck, deposit it in my savings account, now the bank has a $1000.00 liability because I can withdraw it on demand. Let's say the government/FED decides the bank can legally loan $900.00 of that $1K.
So now my neighbor needs a $900.00 loan. He goes to the bank, the banker says he can loan $900 for 10 months, at $100.00/month. They write the loan, now the bank has a $1000 asset, the loan, and my neighbor has a $1000 liability.
So long as I keep my savings in the bank for the ten months, and my neighbor pays back the loan, all is well.
If I withdraw my savings on demand, or if my neighbor defaults, the bank has problems.
So I preach to anyone who would listen, to pay everything off. However folks seem to just take on more and more debt, they'll never be able to pay off.
That is exactly what happens. Go and buy something with your bank card and ask yourself what sort of "money" you just used.
You're right that the commercial bank can't counterfeit cash. But it can grant a loan in the form of a checking account deposit, which typically trades at par with cash. This is why people say "banks create money" (in a fractional reserve system) when they grant new loans. This isn't some weird Rothbardian view; every school of thought acknowledges this. (Some groups might think it's good and some might think it's bad, but they all agree it happens.)
Yes.
@@paulburbank8652 They aren't counterfeiting cash. (There is no cash because there is no market money.) They are counterfeiting credit, or, rather, extending fraudulent credit.
needs to learn to speak