Understanding Money & Banking Pt. 3: Quantity of Money

[Geeman4561]

A dollar in the United States is a Spanish Milled dollar coin, or its equivalent, in coin form, containing 371.25 grains of fine silver. This is shown in the work, "What is the Dollar in the United States" (online), by Dan Goodman. The dollar was established by the Continental Congress before the adoption of the Constitution. The U. S. Congress established a mint to coin the dollar. This was done because Spain had depreciated its dollar. See Hamilton Report on establishing a mint (01/28/1791).

[thinkfree41]

Inflation is not theft, because theft is illegal. Inflation is essentially a charge or tax exacted on society at large in order to pay for 'insurance' against the possibility of deflation. Inflation is a wise choice if it is kept under control. If it is allowed to spiral out of control as the result of unproductive increases in the money supply or other events, it can become ruinous. If you increase the occurence of unproductive money creation, you increase the 'insurance premium' of inflation.

[thinkfree41]

Your analysis is too simplistic here. Money supply can be increased without leading to inflation if it is done in response to productive demand. Increased government spending or lending can lead to increased productivity, thus avoiding inflation. Real conditions are also important. If imports are cheap inflation is essentially exported. Most money is created through credit, which is issued in exchange for a pledge to create increased producitvity.

[heaty007]

The pie is the value of a country. The money represents that value. Banks make the money for you through the gov you gave the right to speak for you. Gov tells the bank to make them more money so the pie can be cut to smaller pieces. The bank prints the money, then they charge your gov interest for the process. So if there is interest on every note then you can never pay it back even if you give all the printed money back. Interest is paid from your taxes MAKING YOU A SLAVE to the bank. Damn!

[CymroGoch]

Does that mean inflation favours the rich as they can more easily grab a larger share of the total wealth once you increase the money supply?

[mulllhausen]

im really liking your videos paul, but it doesnt seem like the monopoly banker taking money out of the bank is EXACTLY the same as taking money off other players. eg if the banker takes $100 off another player who originally had $200 then that player cannot buy a house worth $200 anymore. however if the banker awards himself $100 then that player can still afford the house. i can see how the banker is bound to win if he does either of these things, but i wouldnt say they are equivalent.

[jasperpaws24]

The videos are awesome man. Glad your able to explain it to us regular guys, cause you're pretty damn smart.

[Youngmessage]

@7:00 OMG do all children believe that ! My brother did the same thing just like your sister he refereed to all notes as money (I.E one money two money)

[babapoopoo]

I want to believe and trust that one reason we look at those videos is because something is wrong with the economy. I live in Canada and I don't want to work in the "service" industry. I feel like I am leaching off of everyone's money. What should i do? I'd like to work maybe diving for abalones. what better way to show personal productivity than with your hands? anywyas.. any sort of feedback would be welcomed , ty all1!

[bergweg]

One little note: Money does not buy labour, i.e. the Capitalist does not buy labour with money, he buys labour POWER, which is not the same as labour!

[willyjones7]

the Dollar has lost 95% of its value since the Federal Reserve Act of 1913!

END THE FED!

[willyjones7]

and the Federal Reserve are the biggest counterfeiters in the world!

[bergweg]

And their buddies from the European Central Bank!

[seven8000]

I think we have to differentiate between:

1) increasing productivity

2) increasing number of products and the consumption, which in turn depends on increase of the population and the increase in consumption (we consume more products today than yesterday, e.g electrical devices, mobiles phones, computers, etc.)

For 1) money supply should not increase.

For 2) money supply probably should increase in order to provide the capital for the increase.

[botiq95]

I am a college student, majoring economics. Why I can't find find these 'alternative' ideas in my economics textbooks? I should quit studying economics then...

[bergweg]

botiq95, don't quit, start discussions in your classes with classmates and teachers, make them aware, point out the flaws in official economics.....

[batfly]

Yeah Federal Reserve is heinous act!

[tricky778]

"All that can change the wealth of society... is productivity"

No! This is the classic mistake of the backseat tyrannist. If I am made happy not by consuming food or entertainment, but by sitting as still as possible, using as few calories as possible then you don't have to increase total productivity to make me wealthier, just increase the productivity:effort ratio.

For a number of people, only a certain amount of food is required, decrease the effort needed to get it and I become wealthier.

[PaulMcKeever]

tricky778: if one determines how to decrease the effort needed to create a certain thing, that IS an increase in productivity.

[tricky778]

You should use a different term. Productivity is higher for somebody who works twice their nominal contract hours. "Efficacy" is the correct word and it is important to use it. Political leaders currently believe that having to work more is the very definition of wealth because people working more are more productive (and "productivity" is wealth, as you say in your video). But they could never say that mere working gives a country high efficacy.

[legendre007]

So the economy's wealth does not primarily come from the amount of money, but from the usefulness (utility) of all the goods, services, & technology available in the economy.

In keeping with your metaphor, the society doesn't get richer by dividing the pie into more and more slices, but by baking more pies. :-)

[PaulMcKeever]

That's right. Increased productivity, not an increase in the number of dollars, is an increase in wealth.

Figuratively speaking, a dollar is one share of the dollar supply. If you increase the number of shares, then each share buys less than it would buy were the number of shares not increased.

[tricky778]

Or by prefering cheese sandwiches - which require less effort to make. If people didn't like pies so much they wouldn't have to work so hard to satisfy themselves and would thus be much wealthier.

[Defiranth]

wooow im naked right now!

[miamisurf]

Not too long aog, I read a news article regarding Ex- Russian PM Putin visiting Martha's Vineyard or Camp David in the Northeast US. The article mentioned the fact that one night, russian secret service agents tried to purchase liquor at a convenience store with counterfeit $100 bills. The article also raised the question about governments creating counterfeit bills in order to destabilize the US. Isn't this something which should be looked into more by the media in these economic times?

[charronfamilyconnect]

He who owns the printing press makes the rules or as stated by a famous wealthy Banking Elite patriarch:

Give me control of a nation's money supply and I care not who makes her laws.

Mayer Amschel Rothschild

[charronfamilyconnect]

I have one question for you. What is the alternative to taking out loans from a bank if someone wants to start a business to increase productivity in society. Because as you know money is still required to produce more goods that are demanded by consumers. Any suggestions? A part of me believes that if you allow money to be more easily accessable to entrepreneurs for ex. that you in effect increase the chances of higher production and eventually cheaper goods as more suppliers enter market.

[FpInternational]

Even in a system with a 100% reserve, banks could lend out money that has been deposited with them. The only difference would be: that the depositor cannot withdraw his money while it is on loan to someone else.

[Lucky7wins]

start a partnership is the solution to not borrowing from the bank. If 5 people put 20k each, they own 20% of the business. The 100k can be used to start the business at 0% interest. No blood sucking vampires involved!

[DynaCatlovesme]

I'm enjoying this series as it tries to answer a question I asked in my last video. I still need to watch part 4, though. I do have a problem with your explaination here, however. You make it sound as if a nation's money supply consists only of bank notes printed and coins minted. This is not the case.

[DynaCatlovesme]

There are untold trillions of dollars in private hands, while I would be very suprized if the total value of all extant notes and coins adds up to even a trillon dollars. More questions to come, I'm certain.

[setanta333]

do you believe central banks,technically speaking are counterfeiting money by means of their so called loans,i.e fractional reserve system

[PaulMcKeever]

Well, "counterfeiting" is a legal term, describing a crime. Central banks and private banks are allowed to create dollars for themselves and to lend them out for interest. It's functionally and morally the same as counterfeiting, but - surprise - our governments allow them to do it. In the end, it all comes down to having a government charter: charter holders good, charter non-holders scum of the earth. Government decides.

[setanta333]

loved the video anyway,when is part 4 coming?cheers

[thinkfree41]

@PaulMcKeever A central bank is incapable of counterfeiting. Private banks do not counterfeit because they are allowed by law to create money. This should be illegal and properly described as counterfeiting, but at present it is not. The ability to create fiat money should only lie in the hands of the people, represented by their government and its appendant bodies. To allow private banks to create money is to give away your national sovereignty to private profit-making entities.

[thinkfree41]

@thinkfree41 You have defined the crime of counterfeiting as constituting an action which leads to a reduction in the value of the money already in existence. This is false. Counterfeiting is the action of creating money that purports to have been produced by the sovereign government or one of its (public or private) agencies. The crime is one of identity theft. By gaining a bank charter one is essentially allowed to issue currency 'in the name of' the sovereign state. This is what is wrong.

[Rekkart82]

Very good! Do you support mandatory 100% reserve banking?

[PaulMcKeever]

Yes.