Understanding Money & Banking Pt. 4: Counterfeiter's Motto

The Crafty Counterfeiter's Motto: Part 4 of a multi-part series by lawyer Paul McKeever that explains the nature of money and banking as it has never been explained to you before.

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People & Blogs

Tags:

• money
• banking

[stachowi]

Obviously the counterfeiter is the Fed. Why does the media portray the Fed as the inflation-fighting organization rather than the cause of inflation.

[PaulMcKeever]

The fed increases the money supply when it increases the currency supply, but it is the private banks who create most of the money suppy, because for every dollar of currency, the banking system creates many dollars of credit.

[MisterBozo]

Thanks for all your videos, they're great. I have 2 questions.

1. When new money is introduced by a counterfeiter into the money supply, the counterfeiter is the owner of that new money. When new money is introduced by a central bank, who is the owner of that new money?

2. With a gold standard, what happens when new goldmines are being exploited and new gold is introduced? Aren't the owners of that new gold playing a similar role as a counterfeiter or a central bank? Isn't that a problem?

[PaulMcKeever]

When a central bank increases the number of dollars of currency (i.e., bank notes), it is the owner of those dollars. Everyone else is merely a borrower of them.

In a gold standard, increasing the amount of gold that is used as money has the same effect as increasing the amount of paper dollars. That said, it is relatively difficult and expensive to mine, purify, and mint gold, so the increase is smaller, and happens more slowly...an improvement, of sorts.

[WarrenMajestry]

You're an extremely intelligent human being. I am studying to be a Capitalist, this gave me a whole different perspective to play with. Thank you.

[PaulMcKeever]

It takes one to know one. All the best, PM.

[TheUtube4ever]

If the size of the economy grows due to increased productivity etc. but the money supply remains the same, as a result you mention that this puts a downward pressure on prices ie: 50 cents for a chocolate bar/pop. How does this affect the profit margins for the seller of these items? do they make less/more? how does price changes affect profit for sellers?

thanks in advance

(from Brampton, Ontario)

[thinkfree41]

@PaulMcKeever This is not true. When a central bank buys treasuries from private banks, the money then belongs to them. Having your entire monetary system based upon the availability or otherwise of a shiny metal dug from the ground is simply idiotic. The fundamental value of fiat money, beyond all else, lies in the trust people have in the ability of the issuing country to sustain a truly productive economy. Whilst fiat has its issues, this is far more rational than any retrograde gold fetish.

[thinkfree41]

How exactly is an economy to grow if no new money is introduced into the system? Your advice appears to be that we should be locked into a spiral of constant deflation, ie: continuous economic depression, in which those holding the cash (the rich) hoard it rather than investing it and benefit from increasingly cheap goods, whilst everyone else is reduced to penury. The sensible aim is to maintain stable prices over time with a low level of inflation.

[heaty007]

This guy is a friggin genius!

[krislouis5]

Thanks for the video! Could you please not drive while making video? It creates noise in the background which makes your voice less audible.

[CymroGoch]

This is probably a stupid question, but how does inflation work in a services based economy (such as the UK)?

[tubestick00]

couldnt have put it better myself. i was quite sure that somehow the whole legal world would be controlled. much like the health and medical world i'd say.

just didnt know exactly how.

[richardcadbury]

Lawyers do get govt help in that the govt decides who may or may not be your lawyer, and also who may or may not teach law, and inflates the price of law school by grants etc, all of which lower the supply of lawyers and so drive up prices.

If they stop this help (ie have a genuinely free market) lawyers would be able to charge less. I somehow think Paul would welcome such a change; he seems to be very consistent.

[tubestick00]

i suppose the rate is determined by the market itself. so without becoming a communist state and limiting their fees, i geuss whatever they can get away with charging is whatever they'll charge.

[richardcadbury]

well yes. "exorbitent" and "extremely excessive" are two ways of saying more or less the same thing. what do you actually MEAN, in real terms.

How do you determine the difference between exorbitant and fair?

What is your standard of judging a fair price?