What is Money?

[elected4ever]

I combination of both, in my opinion.

So, a restriction in the quantity of a given idem has the effect of a raising the price of that idem if the demand is there for it. Restrecting the production of oil will cause an inflation in the price of oil because of its limited availability?

The increase in the supply and the availability of money in the market would provide a higher demand for that product sense more people would be able to afford that product. Am I correct there?

 

[elohiym]

So, a restriction in the quantity of a given idem has the effect of a raising the price of that idem if the demand is there for it. Restrecting the production of oil will cause an inflation in the price of oil because of its limited availability?

Basically, yes.

The increase in the supply and the availability of money in the market would provide a higher demand for that product sense more people would be able to afford that product. Am I correct there?

Contingent on banks' willingness to "lend" (expand deposits), a decrease in interest rates will make "borrowing" more affordable, stimulating more "borrowing." As more "borrowing" occurs there is more money in circulation and thus more competition for available products and more competition to get that "borrowed" money that can effect the price (up and down) of those products.

 

[1PeaceMaker]

In significance? A bank changing interest rates will have far more impact than a supermarket raising the price of tomatoes.

What other self-evident ways are there?

Supermarkets aren't monopolies, and they don't have different rights on making produce than anyone else.

Only banks don't have to give equal consideration, but get to collect both principle and interest, driving us into deeper and deeper debt, which is now factually un-payable.

When I say "only banks don't have to give equal consideration" I mean the racket continues.

1PM

 

[Bob Enyart]

Money is just a medium of exchange. No more, no less.

Newman, if that's true, you should be the first to admit that Fed Reserve Notes fully qualify as money. Your definition. No?

Also, I think that popular definition of a "medium of exchange" gets folks thinking in the right direction of what money is, but I think that definition is oversimplified and so, not quite technically accurate. For example, if two neighbors work for one another on their diary farms, and have agreed to pay each other for their labor in eggs, they are not using money, since money must be transferable incomplete transactions. These farmers are basically bartering, eggs for labor, and so they haven't brought actual money into existence. Actual money that is in use provides the functions of accounting, and transferability, and therefore, whether it's seashells or gold, as money it tends to have a greater value than the underlying medium (the shell or the gold), exactly because it is used as money by performing these desirable functions of accounting and transferability.

I submit that the best definition of money is: the accounting of transferable incomplete transactions.

Gold and silver have been the most successful and have been the most used as such.

Newman, I'd like to challenge both of these claims.
Most used: If you are saying that the money that is the "most used" is the money that's been used for the longest period of time, then you are correct. Modern freighters have likely transported far more goods in a century than all the previous rowboats and sailboats in history, and likewise, modern fiat currency has probably been used to transact far more economic activity than gold and silver, which if true would make fiat money the most used.
Most successful: Newman, what is your standard by which you would rate the effectiveness of a currency? U.S. criminal justice lawyers say we have the best system in the world, when we actually have among the highest violent crime and incarceration rates in the world, so that what they really mean is that we have the highest paid lawyers in the world. The ultimate standard by which to judge anything is God's principles, and apparently you and I disagree on the application of those principles to the subject of money, which I believe is an accounting of transferable incomplete transactions. So, as an indirect indicator of how successful fiat versus metal money is, consider that unarguably, throughout the millennia of gold and silver currency, the numbers of people living in poverty swelled tremendously worldwide into the billions. Of course economics are affected by countless factors, but the monetary system is one leading factor. And while poverty rates are admittedly difficult to quantify, during the modern age of fiat currency, irrefragably people have been climbing out of poverty at rates unheard of in human history, reducing the extreme poverty rate by hundreds of millions of people just from 1980 to 2000, from about 40% of the world living on $1 a day to 20% of the world. What today we call hard times, the vast majority of people who could only spend gold or silver would have called fabulously wealthy. And it only slightly helps your case to credit our modern physical wealth to industry and technology, etc., because industry and technology are greatly harmed by unjust economics, and their flourishing is an indication of an effective (i.e. accountable) monetary system. So, as indirect evidence Newman, you can best argue that the gold standard is more successful than fiat money if you ignore the actual poverty and wealth of billions of human beings.

But even "digital dollars" could/should be back by the precious metal. Just because something is convenient doesn't mean it's reliable, stable, or sound. In fact, the opposite usually holds true.

Metal: But that's what we are disagreeing about, and so by just saying cybercash should be backed by gold doesn't itself make the case. I've made an effort to provide substantive argumentation that fiat money and fractional banking are not inherently immoral, but rather, are desirable and can be greatly beneficial.

Convenience: And convenience, and reliability and soundness, often go hand in hand, for that is a major driving force behind economic progress, technology, defense, industry. As things became more reliable (cars, guns, computers, checking accounts), they have become more convenient. Newman I think you would agree that convenience is one of the primary requirements of money, for there is a transaction cost to each instance of economic activity, and if all that accounting is convenient, that can lower the cost of doing business, and hence it will increase the standard of living, enormously, and for billions of people conducting more than a trillion transactions per year. So, because money is the accounting of transferable incomplete transactions, convenience (efficiency) is one of the two factors in judging a monetary system's validity. The other factor is effectiveness (accountability).

Thanks Newman, I'll try to think through more of your post soon.

-Bob Enyart, KGOV.com

 

[elohiym]

Bob, please define immoral for this discussion.

It appears that you don't believe an act in violation of the Constitution is immoral.

Also, clarify what you mean by inherently immoral.

 

[chatmaggot]

It appears that you don't believe an act in violation of the Constitution is immoral.

I thought that discussion was over?

 

[elohiym]

I submit that the best definition of money is: the accounting of transferable incomplete transactions.

I agree that you have provided a definition for a type of money, but how does real money fit your "best" definition? U.S. Silver Eagles are bullion coins--non-debt money--that are legal tender in the United States.

Interestingly, and food for thought, the 1968 edition of Black's Law Dictionary includes this in its definition of money:

"In usual and ordinary acceptation it means gold, silver, or paper money used as circulating medium of exchange, and does not embrace notes, bonds, evidence of debt, or other personal or real estate. Lane v. Railey, 280 Ky. 319, 133 S.W. 2d 74, 79, 81." (Emphasis mine.)

...industry and technology are greatly harmed by unjust economics, and their flourishing is an indication of an effective (i.e. accountable) monetary system.

Are you claiming that industry and technology have not been harmed by fractional reserve banking? I hope not. If you are, let me ask you: where have you been the last several years? Did you miss the financial crisis and the massive bank bailouts?

Let's just look at one example: the home building industry. All through the credit bubble the home building industry was thriving due to unjust economics courtesy of fractional reserve banking, a.k.a. deposit expansion. Then the bubble popped. How are they doing now?

I've made an effort to provide substantive argumentation that fiat money and fractional banking are not inherently immoral, but rather, are desirable and can be greatly beneficial.

Certainly fiat money as legal tender is not inherently immoral, assuming one is not using U.S. law as the standard of morality (by ignoring 1Pe 2:13 and Rom 13:1-7?). Although you might want to read Craig v. Missouri and the constitutional convention of 1787 (particularly the 9-2 vote of August 16, 1787 striking "and emit bills" from the powers of the federal government) to understand the standard of the specific law in the United States and the question of its morality.

I believe the WIR Bank is a good example of a very stable and beneficial complimentary fiat currency system that could work in the United States. However, unlike the Federal Reserve system in this country, the WIR Bank is a not-for-profit bank and is not a monopoly on the issue of legal tender.

As for your claim that you have provided a substantive argument that fractional reserve banking is not inherently immoral, I find it wanting. Whether you define morality according to God's standards ("thou shalt not steal") or by the standard of law in the United States, fractional reserve banking is inherently immoral because it necessitates deception, theft, and economic slavery. I have provided evidence of deception from the Fed publication Banking Basics, evidence of theft from the Fed publication Modern Money Mechanics (the bookkeeping entries prove it), and it is self-evident that if one class controls the issuance of legal tender via a monopoly, an arguably illegal monopoly, that class has enslaved everyone else economically speaking.

 

[elohiym]

I thought that discussion was over?

No. I clarified that acts enumerated and prohibited in the Constitution not contrary to God's standards are moral according to God's instruction to obey the ordinances of government. The discussion that is over is the rabbit trail discussion that misses that point.

 

[Bob Enyart]

elohiym, below I'll re-post my previous answer to you about the Constitution. I do think that's a DISTRACTION though from our question of what money is. We Americans tend to have a US-centric view of reality, but cultures around the world have had money long before, and unrelated to, our U.S. Constitution. And when I raise the question, What is Money?, I don't mean to limit the possible answers to what our Framers may have thought about money. So, perhaps as a favor, for the rest of this thread elohiym, can you pretend that we're talking about Tonga, about money in Tonga, in another century no less, and leave our U.S. Constitution's comments on money as a topic for another thread? I'm interested in what everybody's money is, not just U.S. money.

Bob, please define immoral for this discussion. It appears that you don't believe an act in violation of the Constitution is immoral. Also, clarify what you mean by inherently immoral.

elohiym, I'll pass on your first and third requests here, and as for the comment sandwiched in between, I've stated this blatantly, haven't I? ll just repeat:

elohiym: Yes, I would do so consciously [defend unconstitutional acts]. You speak of the Constitution the way those who love God speak of His Word, as though contradicting it is inherently wrong. In the normal course of human events, it's awfully easy to switch loyalty from God's principles to man's rules.

When the "existing Constitution" regulated the taxation of imported slaves, all Christians had a moral duty to oppose the Constitution in it's complicity with what God said was a capital crime: kidnapping. And because the Constitution regulated the selling of kidnapped human beings (among other ungodly practices), Harriet Tubman and the Christians in the Underground Railroad rejected the Constitution's regulation of slavery as corrupt and they boldly violated those parts of the Constitution. That's why they are viewed as heroic Christians today.

elohiym, what would you do if you realized that our U.S. Constitution was itself unconstitutional. I'm wondering. What would you do?​

-Bob Enyart, KGOV.com

 

[Bob Enyart]

An economy could thrive without any serving attitude. Economies don't grow because people want to serve people, unfortunately. Economies grow when entrepreneurs, capitalists, and consumers combine to supply and demand new technology...

Newman, now you're just being argumentative. McDonald's serves a billion people, regardless of their attitude, and so does Detroit, and plumbers and Google. And of course economies throughout history have expanded and contracted quite apart from the appearance of new technology...

I believe in the separation of the economy and the state.

Huh? Newman, you're the one, not me, who is arguing that the U.S. government has the right to regulate money.

I think that individuals, private banks and storers should be in charge of keeping gold, not a government

You're confusing me Newman. I thought you claimed that the U.S. government should issue money, and that money should be backed by gold. So if I understand you, you think that government should issue money backed by gold but not retain the gold that backs its money?

Newman, unless I've misunderstood you, with this last I've exposed confusion on your part regarding money. But here's how I'd interpret that. It's understandable. Because when you are defending something that's incorrect, your own defense typically will produce contradictions. This happens all the time when debating atheists for example. And it's for these opportunities that I think such discussions are so valuable, to expose my own errors, and those of others.

My "today's resource": www.mises.org

Yes, a worthwhile resource. During my years of studying money I read von Mises' Theory of Money and Credit.

-Bob Enyart, KGOV.com

 

[The Graphite]

No. I clarified that acts enumerated and prohibited in the Constitution not contrary to God's standards are moral according to God's instruction to obey the ordinances of government. The discussion that is over is the rabbit trail discussion that misses that point.

That's exactly why the question itself is an amoral one.

Obeying or contradicting the U.S. Constitution, in and of itself, is amoral.

It is immoral to obey an aspect of the Constitution that contradicts the Creator. It is moral to oppose or defy the Constitution in that respect.

So, the only way to make the question moral rather than amoral is to remove the middle man - the constitution - from the question. If someone acts in accordance with God's will in matters of gov't and criminal justice, they are acting rightly. Honestly, you seem to be speaking very disingenuously on this question, as if you don't understand this very simple and obvious principle. In one breath, you acknowledge that some of the Constitution is right and some of it is in rebellion against God, and then in the next breath you suggest in some broad or general sense that it is immoral to act contrary to the Constitution.

 

[elected4ever]

You're confusing me Newman. I thought you claimed that the U.S. government should issue money, and that money should be backed by gold. So if I understand you, you think that government should issue money backed by gold but not retain the gold that backs its money?

-Bob Enyart, KGOV.com

Bob, I know you are addressing Newman but will you allow me to answer that bit of confusion?

 

[Bob Enyart]

A ""Federal Reserve Note... does not even offer any thing of value. It creates nothing of value. It obligates the Federal Reserve to nothing. It is not even the dollar it purports to be. It is a total fraud... the worthlessness of the Federal Reserve Note.

e4e, well then I'll be happy to relieve you of your burden whenever you find yourself carrying any of them...

e4e, I claimed that, "Requiring a gold standard inflates the value of gold by fiat" to which you replied:

It does not inflate the value of Gold...

Regardless of some inscrutable particulars, the law of supply and demand determines value, and if a government requires gold to back its currency, the government thereby significantly increases demand and limits the supply of gold as a commodity. So e4e I don't know how you could disagree that requiring a gold standard would inflate the value of gold. And that would happen by fiat, that is, by the word of a government official, or a constitution, requiring a gold standard.

-Bob Enyart, KGOV.com

p.s. Just read your post #132 e4e. Sure I'd love for you to clear up the confusion arising from Newman's post, but can you also address this claim of mine that a gold standard inflates the value of gold by fiat?

 

[elected4ever]

e4e, well then I'll be happy to relieve you of your burden whenever you find yourself carrying any of them...

e4e, I claimed that, "Requiring a gold standard inflates the value of gold by fiat" to which you replied:

Regardless of some inscrutable particulars, the law of supply and demand determines value, and if a government requires gold to back its currency, the government thereby significantly increases demand and limits the supply of gold as a commodity. So e4e I don't know how you could disagree that requiring a gold standard would inflate the value of gold. And that would happen by fiat, that is, by the word of a government official, or a constitution, requiring a gold standard.

-Bob Enyart, KGOV.com

I will be happy to address that too but my answers may be quite lengthy so don't look for an immediate response. I have to go back over my research and draft a coherent response basted on fact and not fiction.Is that satisfactory with you?

 

[Bob Enyart]

Graphite, thanks for your thoughtful posts in this thread! And addressed to The Graphite, elohiym wrote:

Bob does not have the credentials he would need to have for me to enter into a debate with him on this subject.

elohiym, like everyone else in this thread, I recognize the topic as important, I've thought and read a lot about it, and I'm willing to place my understanding before others so that it can be challenged. Feel free to change your mind on this and call in to the show.

Neither you nor the banks are allowed to do what they are doing.

As to whether a corporation ultimately can issue additional shares in a just fashion, or whether a bank can issue additional notes, is a question of whether they are complying with:
- God's principles (of truthfulness, private property rights, freedom to engage in economic activity, etc.)
- Man's contracts (that the parties have entered into justly that do not inherently violate God's standards of right and wrong)

So from a biblical perspective a banker would have every right to issue his own notes to be offered as a medium of exchange, and to issue more of those notes as a fraction of his reserves, and his potential customers would have every right to refrain from using them. And if he issues notes in a manner that violates his contractual claims, and those notes lose value, he would be susceptible to charges of fraud, and of course to market rejection.

In a monetary system, unjust activity occurs for example when the government prohibits private individuals from issuing transferable receipts for gold or other similarly purposed notes, and when coining money involves deceit.

The current system of deposit expansion is inherently immoral, and we are presently experiencing the many negative consequences it has brought us.

Again, I've provided what I believe is a substantive rebuttal of this claim, and perhaps you've already done so in a future post (I've only read a third of this thread), but just disagreeing isn't helping me evaluate your claim.

-Bob Enyart, KGOV.com

 

[Bob Enyart]

Hi Bob! Thanks for addressing my comments. I want to first thank you for your consistent vocal opposition to abortion and for your tireless effort fighting for the personhood of the unborn. You have my respect and admiration.

elohiym, thanks, that's very kind of you and encouraging.

I already mentioned that the claim "lenders bring money into existence when making loans" is proven false by the fact banks cannot increase transaction account balances without first depositing money.

elohiym, it seems to me that your argument is the same as your conclusion, and if that's correct, then it is circular. It reminds me of an atheist saying that science proves there is no God because science permits only a naturalistic methodology. You're objecting to banks issuing fiat money through fractional banking by saying they cannot do that. Well, certainly they make billions annually by thinking that they can. So let me provide an illustration that I think will show the reasoning for why these modern banking principles are not unjust:

Illustrating Why Fractional Banking is Justifiable: A 19-year-old is now sick and tired of the last year he has spent in the house playing video games and so he goes out and buys a junker car on credit, committing himself to paying $100 a month for a year. Then he is suddenly interested in doing work for his neighbors, so he paints one guy's garage, and mows another's lawn, and repairs someone else's fence, and so on until the whole neighborhood looks better. All that economic activity was precipitated, and somewhat predicted, by his commitment to repay his car loan. Understanding the time value of money helps to calculate future value. Similarly, understanding a borrower's commitment to repay a loan is a factor in estimating the level of future economic activity. So when a bank loans funds it does not have, it is bringing money into existence (that is, they make an accounting entry for a transferable, incomplete transaction). Doing so as described here shows how and why this can be done responsibly and justly. And when a loan payment is made, a portion of the overall transaction is now complete, and so while keeping the interest it's collected, the bank then expunges the money that it created in the loan.​

elohiym, this is much like what I stated on air, and I believe that it addresses the question you've been putting to me.

A casual TOL one-on-one discussion (not debate) without time pressure would be my preference, if you are interested, keeping in mind that we are both very busy.

Yes, very. It seems to me that this thread is doing nicely as a venue to hash out these ideas. And since I always make time in my schedule to host the show, that's why, selfishly, it would suit me for you to call in, so please feel free to do so.

As to you addressing my question regarding a banks ability to increase a transaction account balance without first depositing money, you really did not answer or develop that in your show... you didn't offer any evidence to support your claim or explain the substance of how that's possible... To claim that a bank can increase a transaction account balance without first depositing money is to claim that a bank can create a liability on its books without having a matching asset. That defies logic, Bob.

Hopefully now this is more clear.

Did you read and understand post #18?

Yes, and I disagreed. But I do think that by wrestling with this, we are getting closer to identifying the substance of the disagreement.

-Bob Enyart, KGOV.com

 

[elohiym]

Honestly, you seem to be speaking very disingenuously on this question, as if you don't understand this very simple and obvious principle. In one breath, you acknowledge that some of the Constitution is right and some of it is in rebellion against God, and then in the next breath you suggest in some broad or general sense that it is immoral to act contrary to the Constitution.

Your statement there is disingenuous because my post that you just quoted specifically implies that I believe it would be immoral to violate specific acts not contrary to God's standards because God commands our obedience to the ordinances of government. And you agree because you said:

It is immoral to obey an aspect of the Constitution that contradicts the Creator.

So you agree with me. Great! :up:

Now, I want to know if Bob agrees with you?

If he does agree with you then he needs to address the constitutional argument because the prohibition of emissions of bills of credit in the Constitution is not immoral.

Bob seems to think that individuals should be allowed to emit bills of credit, and I agree; but he has failed to argue why the government should be allowed to do that in violation of the Constitution, and, more specifically, why the government should be allowed to delegate what it is prohibited from doing and delegating to a credit monopoly in violation of the Constitution.

If it is immoral for the government to emit bills of credit, and immoral for government to delegate what they have no authority to delegate, then the Federal Reserve system is immoral.

 

[elohiym]

...I've provided what I believe is a substantive rebuttal of this claim, and perhaps you've already done so in a future post (I've only read a third of this thread), but just disagreeing isn't helping me evaluate your claim.

Do us all a favor Bob and read through the entire thread before responding further; it's not a long thread; and doing so might help you form a better argument. I've presented evidence from the Federal Reserve Bank stating exactly where they get the money to lend, and it clearly contradicts your claim that banks create money when they lend. So on one hand we have your opinion based on your research, and on the other hand we have the banks explaining what they do, even providing the bookkeeping entries for loans that also refute your claim.

 

[elohiym]

elohiym, it seems to me that your argument is the same as your conclusion, and if that's correct, then it is circular. ...You're objecting to banks issuing fiat money through fractional banking by saying they cannot do that.

No, Bob. I'm stating a fact of Generally Accepted Accounting Principles, that a bank cannot increase its liabilities without depositing an asset. That you think it's a circular argument is why I would prefer to debate a banker on this subject, as he would have to agree with that statement. In order to claim that banks create money when they make loans you would have to explain the increased bank liability. I've already quoted the Federal Reserve Bank publication Modern Money Mechanics to prove up that the single loan transaction increases assets and liabilities. A liability is owing money. Who do they owe, and why, if they created the money? This is basic accounting stuff, Bob.

Well, certainly they make billions annually by thinking that they can.

No. They make billions annually because you think they can.

So when a bank loans funds it does not have, it is bringing money into existence (that is, they make an accounting entry for a transferable, incomplete transaction). Doing so as described here shows how and why this can be done responsibly and justly.

Except you haven't described what they do, Bob. You've just given us a made up story and made some unsubstantiated claims that are proven false by the Federal Reserve Bank's publication Banking Basics that I presented in post #42. By not reading the entire thread before you post you are wasting both our time.

And when a loan payment is made, a portion of the overall transaction is now complete, and so while keeping the interest it's collected, the bank then expunges the money that it created in the loan.

The Federal Reserve Bank claims in Banking Basics on page 6 that they loan depositors money (see post #42). Those deposits are a liability to the bank meaning that the bank owes those funds to the depositor. Once you catch up to that point, explain why the bank would expunge what they owe to their depositors. You need to explain the bank liability that is created by the single "loan" transaction.

elohiym, this is much like what I stated on air, and I believe that it addresses the question you've been putting to me.

Not at all.

...it would suit me for you to call in, so please feel free to do so.

Get a bank president, or a bank executive with knowledge of loan transactions, and I will consider debating him on your show. No offense, but you are having difficulty understanding simple Generally Accepted Accounting Principles, and we would just end up talking past each other, as we seem to be here.

Yes, and I disagreed.

If you disagreed with what I posted in post #18 why didn't you address it point by point? Simply saying you disagreed isn't going to help move the discussion forward, Bob.

What did you specifically disagree with? Do you agree that the "borrower's" promissory is money or just the bank's IOU is allegedly money? :idunno:

 

[elohiym]

So from a biblical perspective a banker would have every right to issue his own notes to be offered as a medium of exchange, and to issue more of those notes as a fraction of his reserves, and his potential customers would have every right to refrain from using them.

In a fractional reserve system under a central bank those rights don't exist. Rather subverted governments make central bank notes legal tender and customers have no choice but to use them. And customers are deceived into believing they are being loaned other depositor's money.