Local Currency Plan

[Supermanpolitician]

I never suggested that!



That was not my question. John goes into a bank and asks for a loan of 1000 Euro. The bank credits 1000 Euro into John's account. Where does that 1000 Euro come from?

Now, i am talking about the money supply. I am not talking about notes and coins but the credit money.

I mean, it has its own wikipedia page.

Money creation - Wikipedia, the free encyclopedia



The difference between the interest it takes in and the interest it pays out, and other bank charges.

BTW assuming the bank isproperly regulated it comes frmo the supply of money thatthe bank is allowed tolend. It must maintain prudent ratios to cover depositors coming in and not lend more than it has on offer. Hence the problem with Anglo cooking the books. If they could create the money there would have been no problem.

You're getting free economics lectures that would cost you dearly in college.

[Kensington]

Dear God, would you ever go into a bank and see how the very basics of banking work!

You've got to be spoofing!

If banks created money, then we would not have a banking crisis. Banks could just create money.

They must have reserves to create money.

Sweet lord, I cannot believe your utter ignorance.

John goes into a bank and asks for a loan of 1000 Euro. The bank gives him a loan and credits 1000 Euro into John's account. Where does that 1000 Euro come from?

[Supermanpolitician]

You've got to be spoofing!



They must have reserves to create money.



John goes into a bank and asks for a loan of 1000 Euro. The bank gives him a loan and credits 1000 Euro into John's account. Where does that 1000 Euro come from?

Banks must have reserves. Anglo cooked the books and lent beyond the allowed reserves and very imprudently.

If as you say the banks can create money, there would have been no banking crisis.

You haveno idea.

As regards where the other 1000comes from, as I have already answered, the banks must either have this or have the right to loan this. If they have neither they cannot loan money, unless they do something illegal as Anglo did.

[Kensington]

Supermanpolitician,

ah come on. You have got to have studied fractional reserve banking?

Fractional-reserve banking - Wikipedia, the free encyclopedia
Honestly, if you are being serious, you will have absolutely shattered my faith in economics!

Are you genuinely saying that a bank debits the 1000 Euro from another account in the bank and then credits it into John's account? All you have said so far is that the bank must have the 1000 Euro deposited within it to make the loan of 1000 (well, 900, or whatever the reserve requirement is at present) Euro to John. This is what i am saying. That is fractional reserve banking!

[Dios]

Would the ECB allow this sort of carry-on?

No, it is illegal, albeit technically. They put up with it in several areas because its not seen as much of an issue, given poor local circulation.

2. The Local Council could get specially made Credit Cards. These cards could be given (or sold at a nominal price) to those who have signed up for the scheme, primarily council employees. Local businesses would be signed up to accept payment in these 'vouchers'. The cards should be made so as they work with normal credit card readers.

3. 100 'points' would be credited to each card. The people could then go to the participating shops and spent their points. One point would be equivalent to one Euro.

4. At the end of, say, a month, the businesses could use the points that they had accumulated to pay council charges. One point = One Euro.

We already had this discussion over on the Amhrán Nua forums, complete with links to existing examples of local currencies. This is a form of social credit, an interesting but ultimately non-operable economic theory. The highlights (to which I have yet to receive a response) are as follows:

• You aren't creating wealth by this effort, you are only creating money.
• Counterfeiting and money laundering. Having a currency thats exchangeable with the official currency makes money laundering easy, which is why there have been problems with laundering among world of warcraft gold farmers. Counterfeiting is likewise a very serious one - in one of the articles in the discussion the question was raised, and the lady issuing the money said "it can't be counterfeited, I've tried it myself". Alrighty then. $100 and €100 notes are rarely accepted any more because of counterfeiting issues, and if central banks for continental size currencies can't secure their currency, the small currency mint has zero chance. The whole situation is wide open on many levels.

You are attempting to deal with this by making it a credit card type situation, but that can easily be defrauded as well, plus it doesn't deal with money laundering in any way.

[Kensington]

This is a form of social credit, an interesting but ultimately non-operable economic theory.

Well, naturally i would disagree with you on Social Credit. It is a sound theory and eminently workable. It would not be fair, however, to refer to local currencies as a form of social credit. Social Credit is a distinct theory which believes that the main cause of inflation is the lack of purchasing power (money) in the economy and consequential spiraling of debt to make up for this shortfall. It believes that a national dividend should be paid to each citizen (of debt-free money) so as the purchasing power in an economy will be equal to the cost of the goods and services produced.

Local currency reform is much broader and emcompasses many different types.

You aren't creating wealth by this effort, you are only creating money.

In order to create wealth, you need to have an adequate supply of money in the economy. With the credit Crunch, there is a decreasing amount of bank credit money from non-governemnt loans in the economy. Obama et al. are increasing the national debt (and trying quantitive easing) to compensate for this reduction in the money supply.

i think that, instead of increasing the national debt, the Governemnt should augment the money supply by creating debt-free money. As that is not going to happen, i think that local authorites should attempt to do it.

I do not think that the local money should be exchangable with national money. i think that the local money should be acceptable for local taxes (which should be introduced0 at the same rate as national currency.

You are attempting to deal with this by making it a credit card type situation, but that can easily be defrauded as well, plus it doesn't deal with money laundering in any way.

The local currency, be it digital or paper, will have to have the same safeguards as the national currency.

[Dios]

It would not be fair, however, to refer to local currencies as a form of social credit.

No, but what you are proposing goes beyond local currencies and comes at social credit in a roundabout manner.

In order to create wealth, you need to have an adequate supply of money in the economy. With the credit Crunch, there is a decreasing amount of bank credit money from non-governemnt loans in the economy.

As was explained on that Amhrán Nua thread, the problem isn't the amount of money in circulation, its that the excess of the last ten years was largely paid for in IOUs, and those have come due. Real wealth needs to be created to pay those IOUs. QE is taking a different approach, trying to make those IOUs less valuable, reset the clock as it were.

i think that, instead of increasing the national debt, the Governemnt should augment the money supply by creating debt-free money.

The government should take over the enormous real and valuable assets of the banks, €120 billion with a less than 2% impairment rate to date, and use those to safeguard the deposits and extend credit where needed.

I do not think that the local money should be exchangable with national money. i think that the local money should be acceptable for local taxes (which should be introduced0 at the same rate as national currency.

You're swapping local currencies for national currencies via taxation nonetheless, which opens even more loopholes.

In 2005/2006, the Australian Taxation Office was investigating an alleged scam by the owners of "barter credit" exchanges, who, of course, can issue "barter credits" to themselves free of cost. The scam supposedly went like this (illustrative numbers only):

(a) The owner would buy goods with a market value of $550 for, say, 1,100 "barter credits." The 1,100 "barter credits" cost nothing, but gave rise to a claim for a $100 GST credit (VAT in Europe). (b) The owner would then resell the goods for $550 cash, incurring a GST debt of $50. (c) After the ATO processed the GST claims, the owner would have $550 in cash, made up of the ex-GST sale price of $500 plus $50 cash from the ATO courtesy of the GST legislation. (d) The owner would claim the nominal loss of $500 as an expense against personal tax. (d) The "barter credit" exchange would write off the 1,100 "barter credits" debt owing by the owner, so reducing its income for company tax purposes by $1,100.

The local currency, be it digital or paper, will have to have the same safeguards as the national currency.

It won't though, unless the local councils have the same resources as the ECB.

[Kensington]

Supermanpolitican,

I really do not know what to say.

You still have not answered my question though.

John goes into a bank and asks for a loan of 1000 Euro. The bank gives him a loan and credits 1000 Euro into John's account. Does the bank debit the 1000 Euro from another account in the bank or not? it is incredibly simple. You either know it or you do not.

If you do not understand how money creation and fractional reserve banking works, check out these wikipedia pages.

Money creation - Wikipedia, the free encyclopedia

Fractional-reserve banking - Wikipedia, the free encyclopedia

Economics - Google Books

Does any of this ring a bell? !

[Kensington]

No, but what you are proposing goes beyond local currencies and comes at social credit in a roundabout manner.

It would be simmilar to a greenback system, but issued by local governments.

As was explained on that Amhrán Nua thread, the problem isn't the amount of money in circulation

I do not know anyone but the Austrians who would claim that. If that were the case, Obama and other Governments would not created giant stimulus packages. Why would you bother if the problem is not the amount of money in circulation?

its that the excess of the last ten years was largely paid for in IOUs, and those have come due.

Well, what you are explaining is the credit crunch. We did not have the money to pay back the enormous debt that we had accumulated. In this present system, that is in-bulit in the system as there is always more debt than money to repay it, causing an ever expanding debt burden to built up. Eventually, the bubble will burst and the Government has to step in and increase the national debt.

I am suggesting that we do not create our money as IOUs; that there is always enough money in an economy to pay all the debt in the economy. That is the whole point of reform.

Real wealth needs to be created to pay those IOUs.

Well, you need money to pay bank loans; not real wealth. I would ensure that there is always enough money in an economy to pay all debt.

The government should take over the enormous real and valuable assets of the banks, €120 billion with a less than 2% impairment rate to date, and use those to safeguard the deposits and extend credit where needed.

If it was mandated that all bank loans had to come from deposits (the bank's own or its cosutomers), than ok, but nationalising the banks would be unnecessary.

You're swapping local currencies for national currencies via taxation nonetheless, which opens even more loopholes

The local authority would issue vouchers for local taxes and charges. if this is illegal, the law should be changed. As i said, they would be Government issued and mandated.

It won't though, unless the local councils have the same resources as the ECB.

Well, they will have to create far, far less money than the ECB. i can't invisage it being a serious problem. the Government can make sure that the notes and credit cards are safe.

[Christel]

If everyone produced their own money, without regulation, than people would have no confidence in it. People have to have confidence that others will accept it in exchange for goods and services and that it will be a good store of value.

Even if the money was not debt-based it would still lead to demand inflation if too much of it was printed.



That would be seriously disruptive, though. it would be far better to simply control its supply on a weekly basis. Money has to be relatively stable if it is to be trusted.

We had something similar when the pound changed to the Euro.

I can't remember really, did we have lesser or greater numbers in our purses after that?

(If they were greater, did that have a psychological effect?)

Anyway, you talked of money storing value. What does this exactly mean? What value?

The question I would have, whatever currency is there, is how do you measure things with it. How do you for example determine how many bananas are equivalent to a car, if measured in currency, how much of a car is equivalent to a laptop, how do you determine how much heating oil is equivalent to a haircut, and how is all this equivalent to an hour of work etc.?

The last would be irrelevant if people could create money.

But then the question arises how would producers attract people to work for them?

They would have to offer something different. Couldn't that open up a totally different type of game?