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Two questions for economic policy discussions

Mimshot
Posts: 275
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3/14/2012 9:40:19 AM
Posted: 4 years ago
Being able to answer these two questions seems like a prerequisite to discussing economic policy intelligently.

1. What is money?
2. Where does money come from?
Mimshot: I support the 1956 Republican platform
DDMx: So, you're a socialist?
Mimshot: Yes
16kadams
Posts: 10,497
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3/14/2012 10:56:04 AM
Posted: 4 years ago
At 3/14/2012 9:40:19 AM, Mimshot wrote:
Being able to answer these two questions seems like a prerequisite to discussing economic policy intelligently.

1. What is money?

something that we think has inherit trading value.

2. Where does money come from?

printing presses. lol
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https://rekonomics.wordpress.com...
"A trend is a trend, but the question is, will it bend? Will it alter its course through some unforeseen force and come to a premature end?" -- Alec Cairncross
thett3
Posts: 14,348
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3/14/2012 11:05:04 AM
Posted: 4 years ago
At 3/14/2012 9:40:19 AM, Mimshot wrote:
Being able to answer these two questions seems like a prerequisite to discussing economic policy intelligently.

1. What is money?

Money as in currency, or a store of value?
2. Where does money come from?

Our perception and belief of its value.
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: At 11/12/2016 11:49:40 PM, Raisor wrote:
: thett was right
Mimshot
Posts: 275
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3/14/2012 11:12:51 AM
Posted: 4 years ago
printing presses. lol
If I buy a printing press, can I make new money? Did the money in my bank account come from a printing press?

Our perception and belief of its value.
That might be why it has value, but where do dollars, pounds, yen, or euros come from?
Mimshot: I support the 1956 Republican platform
DDMx: So, you're a socialist?
Mimshot: Yes
16kadams
Posts: 10,497
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3/14/2012 11:28:58 AM
Posted: 4 years ago
At 3/14/2012 11:12:51 AM, Mimshot wrote:
printing presses. lol
If I buy a printing press, can I make new money? Did the money in my bank account come from a printing press?

At the beginning it did. It comes from goevrment printing presses.


Our perception and belief of its value.
That might be why it has value, but where do dollars, pounds, yen, or euros come from?

square pieces of paper that people drew on :)
https://www.youtube.com...
https://rekonomics.wordpress.com...
"A trend is a trend, but the question is, will it bend? Will it alter its course through some unforeseen force and come to a premature end?" -- Alec Cairncross
thett3
Posts: 14,348
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3/14/2012 11:33:31 AM
Posted: 4 years ago
At 3/14/2012 11:12:51 AM, Mimshot wrote:
printing presses. lol
If I buy a printing press, can I make new money? Did the money in my bank account come from a printing press?

Our perception and belief of its value.
That might be why it has value, but where do dollars, pounds, yen, or euros come from?

Well in that case, like 16k said, printing presses.
DDO Vice President

#StandwithBossy

#UnbanTheMadman

#BetOnThett

"Don't quote me, ever." -Max

"My name is max. I'm not a big fan of slacks"- Max rapping

"Walmart should have the opportunity to bribe a politician to it's agenda" -Max

"Thett, you're really good at convincing people you're a decent person"-tulle

"You fit the character of Regina George quite nicely"- Sam

: At 11/12/2016 11:49:40 PM, Raisor wrote:
: thett was right
logicrules
Posts: 1,721
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3/14/2012 11:51:47 AM
Posted: 4 years ago
At 3/14/2012 9:40:19 AM, Mimshot wrote:
Being able to answer these two questions seems like a prerequisite to discussing economic policy intelligently.

1. What is money?
2. Where does money come from?

Where?
DanT
Posts: 5,693
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3/14/2012 12:19:43 PM
Posted: 4 years ago
At 3/14/2012 9:40:19 AM, Mimshot wrote:
Being able to answer these two questions seems like a prerequisite to discussing economic policy intelligently.

1. What is money?

Money is a substitute for bartering, in where material wealth, such as gold, silver, land, utilities, and food, is represented by a a standard currency.
Some examples of primitive currencies include shells, beads, and rice.
Later when precious metals became more readily available, coins were introduced as the standard currency. Banknotes is paper currency, printed to represent an existing, more valuable currency such as gold, or silver.

This can be seen with the Japanese Koku (rice) which in the 8 century CE became the Mon (copper coins), and Ryo (Gold coins). It can also be seen in the 1868 introduction of Daijōkansatsu notes issued by both public and private banks, and the 1871 exchange rate of 1 yen per 1.5g of pure gold.

2. Where does money come from?

Money comes from material wealth, and currency is coined by either private banks or the government, depending on the country's policy. In the US it's the task of the Federal Government.
"Chemical weapons are no different than any other types of weapons."~Lordknukle
DanT
Posts: 5,693
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3/14/2012 12:21:21 PM
Posted: 4 years ago
At 3/14/2012 12:19:43 PM, DanT wrote:
At 3/14/2012 9:40:19 AM, Mimshot wrote:
Being able to answer these two questions seems like a prerequisite to discussing economic policy intelligently.

1. What is money?

Money is a substitute for bartering, in where material wealth, such as gold, silver, land, utilities, and food, is represented by a a standard currency.
Some examples of primitive currencies include shells, beads, and rice.
Later when precious metals became more readily available, coins were introduced as the standard currency. Banknotes is paper currency, printed to represent an existing, more valuable currency such as gold, or silver.

This can be seen with the Japanese Koku (rice) which in the 8 century CE became the Mon (copper coins), and Ryo (Gold coins). It can also be seen in the 1868 introduction of Daijokansatsu notes issued by both public and private banks, and the 1871 exchange rate of 1 yen per 1.5g of pure gold.

2. Where does money come from?

Money comes from material wealth, and currency is coined by either private banks or the government, depending on the country's policy. In the US it's the task of the Federal Government.

*Daijokansatsu notes. I keep forgetting this site doesn't support unicodes.
"Chemical weapons are no different than any other types of weapons."~Lordknukle
DanT
Posts: 5,693
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3/14/2012 12:47:19 PM
Posted: 4 years ago
At 3/14/2012 12:19:43 PM, DanT wrote:
At 3/14/2012 9:40:19 AM, Mimshot wrote:
Being able to answer these two questions seems like a prerequisite to discussing economic policy intelligently.

1. What is money?

Money is a substitute for bartering, in where material wealth, such as gold, silver, land, utilities, and food, is represented by a a standard currency.
Some examples of primitive currencies include shells, beads, and rice.
Later when precious metals became more readily available, coins were introduced as the standard currency. Banknotes is paper currency, printed to represent an existing, more valuable currency such as gold, or silver.

This can be seen with the Japanese Koku (rice) which in the 8 century CE became the Mon (copper coins), and Ryo (Gold coins). It can also be seen in the 1868 introduction of Daijokansatsu notes issued by both public and private banks, and the 1871 exchange rate of 1 yen per 1.5g of pure gold.

2. Where does money come from?

Money comes from material wealth, and currency is coined by either private banks or the government, depending on the country's policy. In the US it's the task of the Federal Government.

Also we currently are on fiat money, meaning coins and bank notes have a artificial value . Unlike the Gold Standard, the value is not set to the supply of gold, but rather the productivity of the nation.

With the gold standard, if the Price Level of currency does not reflect the quantity of gold, we get inflation, and deflation of the currency.

With fiat money, if Price Level of currency does not reflect the Real National Income, we get inflation, and deflation of the currency.

With the gold standard it's easier to adjust the currency to meet the supply of gold; that is assuming one does not inflate the currency.

With fiat money it's harder to adjust the currency to meet the supply, because the Real National Income is hard to predict.
"Chemical weapons are no different than any other types of weapons."~Lordknukle
Lordknukle
Posts: 12,788
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3/14/2012 1:35:37 PM
Posted: 4 years ago
At 3/14/2012 9:40:19 AM, Mimshot wrote:
Being able to answer these two questions seems like a prerequisite to discussing economic policy intelligently.

1. What is money?

Any good that society values and therefore can be traded in mass currencies.

2. Where does money come from?

Wherever the specific good is generated.
"Easy is the descent to Avernus, for the door to the Underworld lies upon both day and night. But to retrace your steps and return to the breezes above- that's the task, that's the toil."
darkkermit
Posts: 11,204
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3/14/2012 3:16:36 PM
Posted: 4 years ago
Fed uses three methods of dispersing money:

1. Open Market Transaction

This occurs if the government buys commodites (ex: gold), and bonds (treasury bonds). In rare cases it can step in and buy mortgage bonds and other private-backed bonds as in the case of the financial crisis

2. Setting the reserve ratio

The amount of money that fractional reserve money can make is limited only by the allowed reserve ratio.

3. Discount window

In this scenario, the banks borrow money from the FED at interest rate. The "lender of last resort".
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comoncents
Posts: 5,647
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3/14/2012 3:19:00 PM
Posted: 4 years ago
At 3/14/2012 9:40:19 AM, Mimshot wrote:
Being able to answer these two questions seems like a prerequisite to discussing economic policy intelligently.

1. What is money?

In the United States it encompasses fiat currency made up of bills and coins.

2. Where does money come from?

Monetary policy is regulated by the Federal Reserve.
DanT
Posts: 5,693
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3/14/2012 6:17:20 PM
Posted: 4 years ago
At 3/14/2012 3:19:00 PM, comoncents wrote:
At 3/14/2012 9:40:19 AM, Mimshot wrote:
Being able to answer these two questions seems like a prerequisite to discussing economic policy intelligently.

1. What is money?

In the United States it encompasses fiat currency made up of bills and coins.


Fiat Money is still a substitute for bartering. Unlike metalism it doesn't just represent existing metals, but rather all goods. The real Gross National Income is the basis of the value of fiat money, whereas precious metals is the basis of money using a metalist standard, such as the god standard, or bimetalism.
"Chemical weapons are no different than any other types of weapons."~Lordknukle
Mimshot
Posts: 275
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3/16/2012 11:19:58 AM
Posted: 4 years ago
A decent answer, however...

At 3/14/2012 3:16:36 PM, darkkermit wrote:
Fed uses three methods of dispersing money:

1. Open Market Transaction

This occurs if the government buys commodites (ex: gold), and bonds (treasury bonds). In rare cases it can step in and buy mortgage bonds and other private-backed bonds as in the case of the financial crisis
Virtually all FOMC purchases are treasury bonds. So, the Fed creates dollars by buying treasury securities. However those securities supposedly represent dollars that were lent to the government from the private sector. Where did those dollars come from? Also note that when the Fed trades $1M in cash for $1M in treasuries (market value not face value) the net financial assets of the private sector stays the same.

2. Setting the reserve ratio

The amount of money that fractional reserve money can make is limited only by the allowed reserve ratio.
The reserve ratio no longer matters in the least because: (1) banks are capital constrained per Basel, (2) banks can always get more reserves from the discount window, and (3) no net financial assets are created by bank loans since an asset and a liability of equal present values are created.

3. Discount window

In this scenario, the banks borrow money from the FED at interest rate. The "lender of last resort".
Doesn't this also create an asset (reserves) and a liability (loan) in equal amounts?
Mimshot: I support the 1956 Republican platform
DDMx: So, you're a socialist?
Mimshot: Yes
Ore_Ele
Posts: 25,980
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3/16/2012 2:14:14 PM
Posted: 4 years ago
At 3/14/2012 9:40:19 AM, Mimshot wrote:
Being able to answer these two questions seems like a prerequisite to discussing economic policy intelligently.

1. What is money?

Basically, a lubricant for trade.

Let's say I make pocket knives for a company and they pay me by giving me a portion of the knives I make. So if I make 200 knives in a day and get to keep 40 of them, in order to get food and shelter and all my other needs, I need to trade those knives for those things. However, not everyone wants knives (if only it was gum). So I have to find out what people want, and find the people that want knives and try to make a trading chain to get what I want. So I might end up trading my labor for knives, knifes for wood, wood for shoes, shoes for wine, and wine for food. Rather than labor for money, and money for [insert what I need here].

A great example of this can be found in the old SNES game, Secret of Evermore. There is a market place in the game where you have to trade without money. And you can see the vendor that sells that freaking good equipment, but figuring out all the trades you have to do to get what he wants is a pain in the arse.

2. Where does money come from?

I assume you mean where does its legitimacy comes from? It comes from the market, the buyers and the sellers. The liquidity of any product is completely determined by the market. And money can only act as a lubricant if it is highly liquidible. When its liquidity drops, the money collapses.
"Wanting Red Rhino Pill to have gender"
Mimshot
Posts: 275
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3/16/2012 2:46:24 PM
Posted: 4 years ago
At 3/16/2012 2:14:14 PM, Ore_Ele wrote:
At 3/14/2012 9:40:19 AM, Mimshot wrote:
Being able to answer these two questions seems like a prerequisite to discussing economic policy intelligently.

1. What is money?

Basically, a lubricant for trade.

Let's say I make pocket knives for a company and they pay me by giving me a portion of the knives I make. So if I make 200 knives in a day and get to keep 40 of them, in order to get food and shelter and all my other needs, I need to trade those knives for those things. However, not everyone wants knives (if only it was gum). So I have to find out what people want, and find the people that want knives and try to make a trading chain to get what I want. So I might end up trading my labor for knives, knifes for wood, wood for shoes, shoes for wine, and wine for food. Rather than labor for money, and money for [insert what I need here].

A great example of this can be found in the old SNES game, Secret of Evermore. There is a market place in the game where you have to trade without money. And you can see the vendor that sells that freaking good equipment, but figuring out all the trades you have to do to get what he wants is a pain in the arse.

2. Where does money come from?

I assume you mean where does its legitimacy comes from? It comes from the market, the buyers and the sellers. The liquidity of any product is completely determined by the market. And money can only act as a lubricant if it is highly liquidible. When its liquidity drops, the money collapses.

No, I mean where do the units of currency actually come from. For example, in the U.S. there is a number of dollars circulating in the economy that is neither zero nor infinite. Therefore, some number of dollars had to come into existence. How?
Mimshot: I support the 1956 Republican platform
DDMx: So, you're a socialist?
Mimshot: Yes