Topic: Real money vs debt, and the value of bitcoin. (Mitchell-Innes credit theory) - page 5. (Read 7088 times)

The FED is a banking cartel regulated by the government, which is its only client, just like we can be clients of commercial banks. If the government owned the FED, then by making loans to the government the FED would be making loans to itself, which does not make any sense. Government bonds are just a form of debt, so dollars being backed by government bonds just means their being backed by debt. As I said before, dollars are utterly backed by the act of the FED loaning them to the government, represented by bonds.

(Please watch the following video before answering to this post: http://www.youtube.com/watch?v=04MPZgyhG5s.)

The root of this question: Does government own FED?

If they do, then money created by FED is backed by government's own bond, no questions

But this has been discussed many times, FED is a private organization and the ownership of the FED lies in a group of regional reserve banks, and none of them belong to the government. They have 3 mandate from the congress: Maximum employment, stable prices, and moderate long-term interest rates. As long as they can achieve this, government have no more control over their decision. They can claim the ownership of the whole country (by printing money) while achieve these 3 goals

http://theunjustmedia.com/Banking%20&%20Federal%20Reserve/The%20Federal%20Reserve%20is%20Privately%20owned.htm

Once "the payment function is totally removed," then gold has no longer any monetary value. Otherwise, even with no commodity exchange value, it can still function as money: its monetary value essentially consists in its equivalence to everything it can buy - just like the monetary value of any other form of money.

There are many human desire, consumable things and services are just part of them, the demand for accumulating a large amount of saving so that people can retire early is also very real for everyone. Historically recessions happened not because people had less consumable goods, most often it is because that people had produced too much consumable goods but without corresponding consumption (lacking of money)

Actually the demand for money is always the highest due to money's universal equivalence property. You might get bored by eating same bread or watching the same lawn in your backyard, but you never get bored by getting more money. That's the reason money usually hold its value very well even people know that it costs almost nothing to make. As long as other people accept, no questions

Then, since accumulating money itself is a demand, it is important to know what kind of money you will get. You would like to get deflative money instead of inflative money, a money with a production cost instead of a money without a production cost

Gold/silver is more valuable than paper money because even the payment function is totally removed, they can still be used to produce luxuries and tools, and they bear a production cost, which is the fundamental support for their price

There is an essential difference between Bitcoin and bank money: Bitcoin distinguishes the object representing money (the "available toolset") from the money itself (monetary value). It does that by representing money with a private key (monetary value), then metarepresenting it with a public key (monetary representation). By doing this, Bitcoin prevents the confusion between debt and money.

Monetary value and "the money's value" are the same thing, which makes your statement a tautology.


Regarding the FED's money, there is not an act of money creation followed by an act of loaning: those two acts are one and the same. What "backs" the newly created money is nothing other than the act of loaning it. This is how debt and money get confused with each other.

it's just a matter of definition, really.

At the end of our day, we trade our work. I mow the lawn for you, so you owe me a favor in return.

How we do this bookkeeping and keep this information reliable is a question of the available toolset.

Gold/Silver coins are just tools to store and transport the information of value, as are ledgers or tally sticks.

We now live in the information age, so tools like time banking or Bitcoin make sense.

All tools have certain advantages and disadvantages, which mostly revolve around the issue of trust.

Gold/Silver coins don't corrode and you don't have to trust a government, that's why some people like them, that's why they make good tools. But they're still tools. They only carry the information of value, they are not the original value itself (of me having mowed the lawn). They underlie external risk, as they can inflate/deflate in value (imagine massive population decrease for example).

Monetary value is a very vague term, same thing can have different monetary value if the money's value changed. This is clearly visible that USA good's value represented in Euro constantly changes depends on the exchange rate between USD and EURO

Essentially the value only depends on supply and demand, in a world that everything's supply and demand constantly changing, their value also fluctuates, and this also include money itself, means that money's value could also drop to zero if the demand disappeared

Currently the fiat money's value do not disappear because there is a demand for transaction with those money, but mostly because there is only one type of currency. If there are more credible currencies, "monetary value" becomes more complex

From money creator's view, money is not a debt but an asset, just like gold mined by the miners, and paper notes created by the FED. FED created money, money becomes their asset, and they lend this money to government, they receive government bonds in exchange

Today, most money is debt. However, money is essentially different from debt since:
 
1. Debt depends on money.

2. Money does not depend on debt.

The confusion between debt and money is in the origin of the present monetary crisis.

I'm more of a fan of the classic qualities of money durability, divisibility, transportability, and noncounterfeitability.  Modern credit/debt fails a number of those points so it's hard to see it as money.  Bitcoin on the other hand fits all four rather well.

Graeber is right. Debt is the only real money. All other goods are assets and valued in debt.

Mitchell-Innes theory could really apply to ASIC manufacturers and their consumers.

BFL is a great example :rolleyes:


IE:
I will only sell you my miner if I can make more than if I mined myself. :p

Government bonds are the obligation the government has of repaying the face value of those bonds to their holders, with interest. It is only because government bonds are the promise of money that we can treat them as if they were already money. However, this can only be true as long as we believe on that promise.

Regarding houses or land (let us leave bitcoins out of this for a while), again: we could not treat them as money if they had no monetary value, which requires their expression in money that is just money (and not an asset).

Finally, we can only call a government bond an asset as long as we mistake the debt it represents for actual money to then mistake that money by a particular asset.

Government bond and MBS are both assets. Given enough premium, you can payback your debt with some other assets like house/land/gold/bitcoin. When people default on their mortgage loan thus be free from debt, the banks get their house as a payment of debt

An asset is anything non-monetary that we take as a monetary value, which is impossible without money. Debt is my obligation of repaying a sum of money to whoever loaned it to me. If I can choose to express a debt in assets, it is only because I can express those assets in money.

Debt simply means assets in the future, it is exchangeable with current assets, with a risk premium

There are no longer any assets backing most of the currency, only debt.


Sheer gold money has no backing: it rather backs all its proxies.


Gold was the monetary standard until 1971, and even then it was already just a partial standard: the other part was already just debt.

If the assets that back the currency disappeared, then paper note will lose all of its value, while gold still keep some of its value, since the demand for gold still exists

If the value of gold drops by half, things will get complex. Because gold still have some assets that back it, its exchange value might still be stable for a while, like paper notes. Of course eventually it will impact the exchange rate of its underlying assets, otherwise you can get same amount of asset with less value

In this case we suppose that the underlying assets is the measurement of value, but in reality it is more likely the value of gold is the standard (we say the value of asset appreciated instead of gold value dropped), because it is scarce, have universal equivalence and always have a demand (That demand will never disappear, because of the existing of women )

Let me give you an example from my book Representational Monetary Identity (http://omniequivalence.com/money-as-multiequivalence/):


Neither trust nor utility can give anything an exchange value, whether monetary or not: trust is merely a requirement for social interaction in general, and utility, for exchange value in general and monetary value in particular.


Exchange value is never "derived from" utility: although a commodity must be useful to have exchange value, its exchange value does not originate from its utility. Likewise, although we must trust each other to buy from and sell to each other, the exchange value of our commodities and money does not come from our trusting each other (otherwise, the more we trusted each other, the more valuable our commodities and money would become).


The question was: how its metallic properties could enhance its exchange value? In your terms: why those properties would affect our "agreement" on its exchange value? Do not objective properties affect the exchange value of things? Otherwise, would it not be just a coincidence that some things are consistently more expensive than others?


Now we are talking. Take more time on the question before trying to answer it: this is not an easy one.


In my example above, those three owners can choose a fourth commodity to represent money just in the context of that particular exchange. In this case, money would need not be valuable in the future: the only trust required would be that of the owners in each other (that they would not kill - or steal - each other, etc).


So the more we trust gold to have an exchange value in the future, the more valuable it will be?

One thing is to trust more on the future monetary value of gold; another is to trust on more monetary value of the future gold.

And what if the market price of gold drops by half? Then the value of my gold is also cut in half. So in practice, a piece of gold is just another way to hold a quantity of credit.

Good example, thank you.