Ok then. So the previous post generated a rather enormous amount of questions and accusations. Some of them very legitimate... others so amazingly stupid that the author should be banned from the internet forever. I will do my best to address the ones that I feel were the most important so as to shed as much light on my position as possible.
Raggededge: Owning 3 cars does not allow you to lend out 30 cars. This is what banks do with fractional reserve lending. In the banker world, if you filled one of the cars with tannerite and blew it to kingdom come, the bank would then only be able to lend out 20 cars. If we accept the premise that credit = money, we have just seen the money supply reduced
No. if we accept that credit is money in your scenario... money is growing slower. Not decreasing. Growing slower only equals a cut if you're a democrat... or you went to Harvard Business School and are therefore functionally retarded.
From Josh: Nate, would you define inflation solely as the increase in the supply of money? Or would you define it as an increase in the supply of money and credit?
Only money. Credit is not money until its spent. Its a mechanism for introducing money into a system. Its like saying a door is a crowd... because the crowd walked through the doors. No.
ODG says: I thought that your view was that debt != money? How then can lending (ie debt) deliver money to the system?
Because it becomes money when it is spent. Fed creates an FRN from thin air... gives it to bank... its not money yet... bank gives it to you... its not money yet... you by a car with it... now its money. Now its in M2.
Athor Pel: In a debt backed fiat money supply, can all debt ever be paid back?
Joshua_D : Aside from the technical aspects of transferring a CD, I don't see why a CD could not be used as money. I have a car, you have a $3,000 CD, you sign the CD over to me, I sign the car over to you. Done deal.
Yes. You could also give me a my little pony that you said was worth $3,000 and it would be money too. But if I intend to sell the my little pony to get the money for it... that's an additional transaction.. so its not money. Just like the CD. It could be money... or it could be an IOU.
Joshua_D: Also, your gambling analogy falls short. While the little ball is spinning, there is $40,000 of your money on the table and the whatever the house plans to pay if you win. You money and the house's money is in the money supply, you are just wagering over who gets to keep the money.
Mate... if the casino wins the chips do you get to count them in your money supply? No. You didn't understand the analogy. I suspect most folks missed it. In the Analogy your wallet is the money supply, and the Casino is an international banking cartel.
again... from Joshua_D : I mean, you claim that debt isn't money, but we all know that our current money system is a debt-based system, and our money has to be borrowed into existence.
This is important folks so pay attention. What our current money system is based on literally means nothing. What money is based on... also means nothing. All that matters is that people accept that it can be used as an exchange medium. Anything can be money. Anything. until you grok that... you're never going to be able to follow this debate.
Jack Amok says: Money is nothing more than a voucher for future goods and services.
Wrong. I love Say. The man was among the biggest of the big hitters. But he missed a very important point about what makes money money. I can write all kinds of vouchers... monopoly money for example... is a voucher for goods and services. So why isn't it money? Well it could be... if someone accepted it as money. But people don't. Why? there is no why. It goes back to subjective value. Ultimately you're not arguing what is or isn't money... you're arguing what is better to use as money and what isn't good to use as money. I'm just pointing out... it can all be money. Unless in a transaction an additional transaction takes place to complete the transaction. I will now blow your mind. There is a case where even cash isn't money. If I want Gold... and you give me in stead... 2oz worth of gold... in CASH... and then I go buy gold with the cash... in that transaction... Cash wasn't money. now do you understand?
THERE IS NO MACRO. THERE IS ONLY MICRO.
come on TZ... I gave all kinds of examples of something that is money. I flatly said ANYTHING could be money. What something is or isn't based on means NOTHING. As for virtual currencies... Of course they can be money. NFC is great for this. you put your phone next to mine... a bunch of bit coins get deposited in my account... I give you a cow. POOF. Bit coins are money. See how that works? Bit coins are money. PHONES are not money. Phones are like hands moving gold coins around. Dig?
BobofBobland demonstrates that he doesn't read or type to well: This is some bullshit. If a bank issues unbacked loans, then it increases the total amount spendable money, which is what, in practice prices, respond. The "realness" of the money that is created is irrelevant. You could very easily argue that dollar bills aren't real money either, as they are also unbacked, but then FTS. Do you really think that if a bank were to issue a loan for twice the current money supply, prices would be unaffected? And is not our concern over the money supply based derived from our concern over prices and weatlh transfer?
Ciphra Summam asks: I go to the bank and borrow 250K to build a home. The bank makes me the loan, I use that to fund the construction. Is that money?
Yes. It becomes money the second you spend it. What is not money.. is the debt you owe to the bank.
As best I can tell... I am all caught up... and I suspect many of you now realize what I said wasn't quite what you thought I said. Except Bob... who no doubt thinks his comment nailed me to a wall.