In your opinion where should new money come from?

For capitalism to work there needs to be a constant injection of new money, unless everybody has a saving rate of zero. Many people make debts with a negative saving rate, other people have a saving rate of up to 100% and a tiny fraction of people have a saving rate of greater than 100%, meaning that what they save and get in interests exceeds what they spend.

If we assume a fixed ammount of money in the economy, the money is going to dry up as it lands in the pockets of the people whom are able to turn a profit. The more money ends up in fewer and fewer hands, who in turn increase their saving rate, the greater the strain on the economy.

So where should new money come from? Should the ole printing press be fired up, redistribution, by taxing the rich heavily, or should the economy just rely on people who have no money taking out loans?

Money will come from where it has always come from..
Thin air.

Rich people buy things, Lots of things. Obama recently opened his mouth about the rich buying yachts. The yacht building business went in the crapper and had to lay off a lot of people. The unintended consequences of turning the rich into villains hurts the poor the most. The rich stay rich and the poor get poorer.

reply to post by Merinda


Help me out on this...

If we assume a fixed ammount of money in the economy, the money is going to dry up as it lands in the pockets of the people whom are able to turn a profit. The more money ends up in fewer and fewer hands, who in turn increase their saving rate, the greater the strain on the economy.

I guess the thought is if there is a fixed amount of 'money' in circulation, it will all soon end up in the hands of those who can operate in a values-neutral mode and with a strong proclivity to horde. Yes?

If that is true, which I believe it may be, then it does not matter how much 'money' is in circulation. It is continually on a course of slipping through the hands of the many into the pockets of those few. So as we inject more 'money' into the system, all we are doing is hovering at some point just before there is no 'money' in the system.

What am I missing?

Originally posted by Merinda
For capitalism to work there needs to be a constant injection of new money, unless everybody has a saving rate of zero. Many people make debts with a negative saving rate, other people have a saving rate of up to 100% and a tiny fraction of people have a saving rate of greater than 100%, meaning that what they save and get in interests exceeds what they spend.

If we assume a fixed ammount of money in the economy, the money is going to dry up as it lands in the pockets of the people whom are able to turn a profit. The more money ends up in fewer and fewer hands, who in turn increase their saving rate, the greater the strain on the economy.

So where should new money come from? Should the ole printing press be fired up, redistribution, by taxing the rich heavily, or should the economy just rely on people who have no money taking out loans?

I've seen a bunch of posts on the money system and yours is basically the first that actually talks about the actual currency needs of the population. There currently is not close to enough money available. Anything that gets printed now justs ends up in the same holding tank of the elite, but maybe on a different shelf. Bravo!

I think we need to print, with no debt attached, the money our government needs to operate, so that would eliminate Federal taxes. At the same time we need to eliminate the fractional reserve banking system. We probably would still be way short of needed money under that system so pay offfhousehold debt with newly printed money as well.

In the end we will likely have the right amount of money in ciirculation which will prove not to be inflationary. Getting rid of fractional reserve banking and the leverage in our system would offset any inflationary effects of the currency printing.

Do this and I will gladly embrace the republican position of leaving every man on his own. Until then this ideal is unthinkable for me.

Originally posted by ABNARTY
reply to post by Merinda

 

Help me out on this...

If we assume a fixed ammount of money in the economy, the money is going to dry up as it lands in the pockets of the people whom are able to turn a profit. The more money ends up in fewer and fewer hands, who in turn increase their saving rate, the greater the strain on the economy.

I guess the thought is if there is a fixed amount of 'money' in circulation, it will all soon end up in the hands of those who can operate in a values-neutral mode and with a strong proclivity to horde. Yes?

If that is true, which I believe it may be, then it does not matter how much 'money' is in circulation. It is continually on a course of slipping through the hands of the many into the pockets of those few. So as we inject more 'money' into the system, all we are doing is hovering at some point just before there is no 'money' in the system.

What am I missing?

As I posted above you would need to eliminate fractional reserve banking and leverage. Once these are gone it is much harder for those who end with all the money, to obtain the money in the first place. They will have to earn their money once this is done instead of building their pile exponentially with financial machination.

Simple: real money should come from the ground. Real wealth still does (Oil, land, goods based from the ground, one way or another). While Gold is at a higher value than silver, Gold's actually being mined in several places. Look into how much less silver is being found now. How many mines are there for it?

Printing more money just makes it worth less. Obama just printed 28 billion. The result is higher gas prices because OPEC raises the price of a barrel of oil to counter it. Printing money not backed by gold is suicide. The way you get more money into the market/peoples hands is by producing something to sell more or less. I wish we could just print enough to give everybody 100 million dollars each. A loaf of bread would cost 80 million if we did that though.

reply to post by Merinda


I believe the money should come from people living within their means instead of living beyond their means as most people do today.

Back in the days when people had savings accounts it was because people bought and paid for what they needed and saved the rest. Most people didn't have tens of thousands of dollars in credit card debt because if they wanted something they saved up their nickels and dimes until they could afford to pay for it in cash. If you wanted to go to college you or your family worked and saved up to pay for it, so no $75K in student loans. People didn't feel the need to go out and get a brand new car every few years- they worked hard to keep the ones they had going as long as possible. People bought houses that they knew they could afford to make the payments on rather than signing up for a "McMansion" that they knew was beyond their means.

A huge majority of the money floating around in the current economy isn't "real" money but rather I.O.U.s. People buy all kinds of unnecessary bollux with credit cards, making minimum payments that will not even cover the interest on what they owe. Keeping up with the Jones' and just having to have each new trendy thing that comes along is ruining our economy. It's a vicious cycle of endless debt. The creditors know this and yet they keep extending credit to those they know cannot afford it. And those who know they cannot afford it keep running up their credit debt anyway, so when it finally becomes overwhelming and they lose everything.

Until people start getting over the whole "I need it now...now...NOW" mentality and quit depending on credit rather than buying with "real" money I don't think there is much of a chance of seeing new money pumped into the economy. I'O'U's just aren't going to do the trick.

reply to post by Merinda


In Capitalism, investments are RARELY in actual dollars.. Most investment is in "Real Property", "Ventures" or "Futures"

The amount of actual "Dollars" floating around is essentially not specifically relevant as long as there is a minimal amount there to cover any whom hedge their funds by hiding it under the bed

The idea that more money is needed is in all reality a Liberal tactic used to stave off inflation. It is and has been proven time and again, to be a failed policy and yet as long as we have a liberal administration, they will keep trying it

Semper

Originally posted by jimmiec
Printing more money just makes it worth less. Obama just printed 28 billion. The result is higher gas prices because OPEC raises the price of a barrel of oil to counter it. Printing money not backed by gold is suicide. The way you get more money into the market/peoples hands is by producing something to sell more or less. I wish we could just print enough to give everybody 100 million dollars each. A loaf of bread would cost 80 million if we did that though.

The amount of money in the economy should be a sum of all historical production less investments in capital assets. Thus the money supply should rise at some variable percentage of GDP every year. More money printing not need to be inflationary if savings rates stay adequate. Eliminating debt backed money and fractional reserve banking will cease inflation in it's tracks.

reply to post by ThisToiletEarth


Money is a religion....Youare asked to believe that 20 dollars is actually worth 20 dollars, when it is worth actually as much as 1 dollar, 10 dollars,or 100 dollars..our dollars are worth only the paper it is written on. When you give someone a 20 dollar bill they have to percieve its value based on faith. They are faithful that the government will honor that note. The day people lose this faith is the day it comes crashing down. So keep the faith my children of government and pray to the Fed bacause that is the god of the land............A better question is what does one truely own???

reply to post by sligtlyskeptical


That does not take into account consumables or money going to other countries via aid/interest on debt or a million other reasons for money to leave the country.

reply to post by Merinda


For money to work, it must be issued, as Ben Franklin said, "in proper proportion to the demands of trade and industry to make the products pass easily from the producers to the consumers. In this manner, creating for ourselves our own paper money, we control its purchasing power, and we have no interest to pay to no one”. That should be the duty of the Treasury Department.

But the bankers in London didn't like that idea so in 1764 England passed the Currency Act and even after "independence", except for a brief time during Jackson's administration, we've never managed to get free of the moneylenders.

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reply to post by jimmiec


If all foriegn countries called in their notes the US only have enough assests to cover 20%, and that is just foriegn countries, not the people of the US. That is why they try to prevent a run on the banks.

Originally posted by jimmiec
Rich people buy things, Lots of things. Obama recently opened his mouth about the rich buying yachts. The yacht building business went in the crapper and had to lay off a lot of people. The unintended consequences of turning the rich into villains hurts the poor the most. The rich stay rich and the poor get poorer.

Depending on how rich they are they still manage to lock out far more money out of the economy than they reintroduce, despite buying expensive things like Yachts.

Help me out on this... If we assume a fixed ammount of money in the economy, the money is going to dry up as it lands in the pockets of the people whom are able to turn a profit. The more money ends up in fewer and fewer hands, who in turn increase their saving rate, the greater the strain on the economy. I guess the thought is if there is a fixed amount of 'money' in circulation, it will all soon end up in the hands of those who can operate in a values-neutral mode and with a strong proclivity to horde. Yes? If that is true, which I believe it may be, then it does not matter how much 'money' is in circulation. It is continually on a course of slipping through the hands of the many into the pockets of those few. So as we inject more 'money' into the system, all we are doing is hovering at some point just before there is no 'money' in the system. What am I missing?

You are quite right. New money has to be infused constantly, unless all of the market participants have a saving rate of zero. Thats why we had the inflation we had, the problem was fixed with the ole printing press so far.

reply to post by Merinda


Capitalism does not require a constant injection of new money that is Kaynesian economics BS.. WE DO NOT HAVE CAPITALISM AND HAVEN'T FOR AT LEAST 50 YEARS... Capitalism requires free markets and liberty we have neither.

New money should come from tangible items of value traded for equal value gold silver commodities etc based on supply and demand not some government/banksters arbitrarily printing it or typing in digits on a computer screen.

it is a means of exchange pure and simple. People should be able to use whatever they like for money and what ever anyone they transact with will accept. Its nobodies business what I use for currency but mine and whom ever I am trading with.

Constantly injecting money into the economy is part of the Kaynesian fiat system and designed to inflate the economy so banksters and speculators can steal the wealth of the people based on the false prosperity (rise in prices). Along with giving a banking cartel a government protected monopoly on the monetary system. That is not capitalism that is theft and fascisim...

It is a far to complex to explain in a simple post which is why moist people have no clue how the system works and why we are in the mess we are in even though it is perhaps the most important thing in our lives and will be the death of the economy soon...

PS their is no need for a saving rate of 0 that is ridiculous where did you get that idea? Even a fixed amount of currency in an economy is always in motion as people need to buy goods and services and it increases gradually as people create more real value thus they can save for things they need or want as they trade their goods and services for money. The problem is your thinking that money must come from some central source like government when that is not the case.

Prices always adjust to the amount of currency in circulation relative to the goods and services being produced. That is why it is wrong for government to arbitrarily inject it into the economy. If you lower the amount of currency but goods and services remain at the same level prices will naturally fall, the opposite if you inject currency. The amount of currency in circulation thus does not matter if it comes from actual supply and demand i.e. an increase in goods and services thus prices will remain relatively stable, except with false inflation/deflation as we see in our current fiat system.

Fiat money (paper currency and coins), however, makes up only a small part of America’s money supply. A much greater part consists of demand deposits, such as checking accounts, and “near money.” We may not think of checking accounts as money in the traditional sense, but almost half of all transactions today do not involve currency at all. Instead, they are completed through a transfer of funds initiated by the use of a check or a debit card. Near money includes things like savings accounts, certificates of deposit (CDs), and money market mutual funds. You can’t actually buy something with these; a retailer can’t subtract his charge from your savings account book. But these can be easily converted to cash or transferred to a checking account. In other words, they are not exactly but near money.

www.shmoop.com...

Good read there about money considering the digital age the physical form of cash is outdated which creates more problems.

Money should always be backed up by something the problem is there is nothing out there that can back up that money.

The system is broken that is for sure so where should new money come from?

It will be 100 years since the federal reserve which was created to solve problems that created more problems that it was worth.

Someone's solution will be just the same.

reply to post by neo96


Actually all that is just the petty cash of the fiat system the bulk of money is created via loans. Everyone thinks when they get a loan there is money sitting somewhere in some account the gets loaned to them. That is not the case. The promissory note they sign is the money and gets deposited into an account as an asset. That's is the funding for the so called loan. That's right your signature on the note funded the so called loan even though no money ever existed. And you got the privileged of paying the bank for several years for hoodwinking you into you stealing your credit. And now the bank has a new asset it can inflate to 9 times the value via fractional reserve BS. That is how they blew up this massive bubble which partially deflated in 2008 with real estate. (all those loans evaporated to where they came from; nothing!) Now with QE3 the are re-inflating the bubble and the crash will be much worse this time. Money from nothing indeed!

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reply to post by Merinda


The money supply is like a balloon filled with air, the amount of money injected into economy has to be enough to keep the balloon buoyant without bursting or deflating it.