Topic: The fatal flaw of Real Bills Doctrine - page 4. (Read 5292 times)

The state is not "the people" but a select group of people (politicians and high public office holders: aristocrats) that live good lives on the production of the rest of the people.

Elections is the joke that has been invented to make the rest of the people think they have something to say.  They do, in fact.  They can now choose, every so many years, WHO will be the clan that will be extorting you.   Elective aristocracy instead of hereditary aristocracy.
And yes, that does have positive effects: the elective aristocracy uses lies instead of violence to stay in power, and sometimes it even happens that it is simpler for them to do really something good instead of making it up.  But these are rare occasions.

I'm only talking about public land.  It belongs to the state.  The state is an entity that is comprised of the people belonging to that state.  The govt is elected by the people.  It's not communism.

If you think it's communism then you need to review junior high school civics class.

If the state auctions public property (like airwaves) to private enterprise then the money goes to the public coffers.  That money gets spent on public works which is to benefit all constituents of the state.

Gaawd why is it you don't know this?  If you don't like it vote for different representative or move out.  It's that simple

Strange logic, how did you reach this conclusion? Chinese miners are not cheap anymore

So bitcoin needs a "made in China" stamp?  ha, makes sense

What is this "land belongs to people of that state collectively" you are talking about, is it a communist country?  

As I know, some western state governments are selling their property little by little to those bankers, due to that they can not afford to repay the loan

As usual, banks will never tell you what they are actually doing, but you can get the concept step by step

From a higher level of abstraction, MBS is some kind of asset that has value, it does not matter it is gold or land or debt, they are all something with value. Issuing money backed by valuable asset is the spirit of Real Bill's Doctrine, MBS is the Real Bill here

From the name, MBS is a kind of security: A tradable financial asset, similar to bond. Bond is debt, backed by the promise of repay in future. So MBS is also backed by the promise of repay in future, but with one exception: It has a mortgaged house behind it. If the borrower defaults, bond becomes worthless, but when that mortgage defaults, MBS owner would take over the property as a compensation

So MBS is not only debt, but also a debt backed by the land. During a financial crisis this debt have a high rate of default (foreclosure), as a result the property will belong to MBS owner

FED purchased huge amount of MBS, because when house price crashed, many of these securities get defaulted and leave the banks with house. If banks sell these house on open market, they will crash the house price further and trigger a total melt-down of everything

So FED was actually buying these houses to prevent a house sell-off, but FED greatly benefited from this move and now all those houses are listed on the asset side of FED's balance sheet

Poor logic.  It dilutes anything denominated in USD including banks assets.

What is this land crap you are talking about.  If land belongs to the state then it belongs to the people of that state collectively.  As in PUBLIC. 

Stop being a whiny selfish prick and think somehow you are owed anything.  Or your share of taxes contribute more than the next guy

Problem is when they issue more money, the general common people's wealth get diluted. So in effect, indirectly we are working to pay off the land purchase but the difference here is that we don't own any share of the land.

Thats not buying land or real estate.  They're called securities.  As in Mortgage Backed Securities.  LOL

http://pages.stern.nyu.edu/~JStroebe/research/pdf/EstimatedImpactFederalReservesMortgage-BackedSecuritiesPurchaseProgram.pdf

Please cite source where the FED is buying land.  I call mythbusters in this claim

In modern fiat money system, the fiat money holder do not have the right to redeem the land, so banks will keep buying land using this trick and the available land will get less and less, thus the price will rise forever. The land price only drops if there is no new money inflow, but just look at what FED did, they printed 5x more money to buy those lands to support the price of them, actually the best time for them to buy the land is during an economy crisis

And it will not cause inflation if they purchase equal amount of national debt at the same time. A high ratio of debt will cause austerity, which reduce the consumption on daily goods, counter the inflation tendency of money printing

It's amazing that on one hand, they keep buying properties using printed money, on the other hand they keep buying debts using printed money and charge interest. The inflation effect of property purchase is negated by the deflation effect of more debt for the whole nation, how genius  

At least bitcoin miners put real resources in making bitcoin, while fiat money is just a promise

The entire tax base of the nation won't give you anything in return, that promise is not payable, e.g. you can not get your money to FED to exchange the bond that backing them. Only FED will decide when should they sell assets, and it seems that they will never sell assets, only buy

And the government's tax income is not enough to pay back their old debt + interest

It only works if the value of the land rises. If the value falls then the bank will fail if there is a run.

Also, it will cause inflation even if the money is used to buy assets.

Bitcoin is made by Chinese computer farms.

Yeah this sure is more real than govt bonds.  Let's see who I'd trust more the ENTIRE tax base of the USA or some crappy Chinese business.  Him difficult choice

John Law's Real Bills Doctrine says that banks can create fiat money backed by his assets

Originally, if a bank have one ounce of gold, then they are able to issue fiat money of corresponding value. The fiat money have the same purchase power as one ounce of gold, since they can redeem the gold at bank anytime

However, John Law went one step further, saying that if the bank have one acre of land, then they can issue fiat money of corresponding value, since they are backed by the value of that land

Adam Smith pointed out, this increased money supply will cause large inflation and will not help economy. However, his view is too academical, since the money creator will not be so foolish to use their new money to buy goods for daily consumption to trigger inflation, they will use those money to buy assets


Consider such a scenario:

The bank would start with a small amount of asset, say one acre land. They issue the money worth of one acre land, then bank can use those money to buy one more acre land. After they get the new land, they could issue money worth one acre land again, and use those money to buy another acre land...

After a while they have bought so much land and now the price of the land has increased, they can issue more money based on higher worth of their lands. They could keep doing this until they bought up most of the land in the country

And since the land price is not showing up in inflation statistics, they can keep buying like this for many years

To make it more aggressive, now they purchase not only land, but also debt, which is in fact future products and services. And purchasing debt is even better than purchasing land, since a high level of debt will put a downward pressure on consumption, so inflation will not be a problem no matter how much land they purchase


What does this mean?

If the money creation is based on the backing of assets, then money creator can acquire almost all assets if he just scale up his operation, without doing any meaningful work or giving anything valuable in return



On the contrary, gold or bitcoin is totally different, you can not issue money based on backing of anything, you must put real valuable resource to get it, this created an equal ground for value creation