Why don't Economists understand money? (Conference 2013)

www.positivemoney.org/
Prof Victoria Chick, Emeritus Professor of Economics, University College London, addressed the question: "Why Don't Academics Understand Money?" at the Positive Money conference in January 2013. She said there has been a regression in the way economics has been taught. This 18 mins video gives some very interesting insights.
The book mentioned in the talk can be ordered here:
www.positivemoney.org/shop/mod...
More about the 'Modernising Money' conference 2013 here:
www.positivemoney.org/conference/
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Positive Money is a not-for-profit research and campaign group. They work to raise awareness of the connections between our current monetary and banking system and the serious social, economic and ecological problems that face the UK and the world today. In particular they focus on the role of banks in creating the nation's money supply through the accounting process they use when they make loans - an aspect of banking which is poorly understood. Positive Money believe these fundamental flaws are at the root of - or a major contributor to - problems of poverty, excessive debt, growing inequality and environmental degradation. For more information, please visit: www.positivemoney.org/
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[@wyleong4326]

Prof. Victoria Chick is just amazing.

[@AlanHarveyIDEA]

Absolutely well said. The rise of monetarism and the forgetting of how things worked happened at the same time, to the great detriment of the economy and for the credibility of economists.

[@panoswakeup]

kjr63 It is the monetarist view of the QToM. Basic assumptions are that, 1)V is fixed(constant) 2)T is treated as Y(real value of national output) which is determined by other(real) factors and not M, therefore the equation becomes M=P (changes in the money supply lead to direct changes in the general level of prices). This was criticised by Keynes.

[@kenshikenji]

the role of money is to facilitate exchange. investing is just another form of exchange. one where someone desires to borrow capital now for future production. its when banks loan out other people's production under the false pretenses that they have it on demand is the problem.

[@kdmarrison8845]

Illuminating talk & interesting comment section

[@Joe11Blue]

Money is a means of exchange, nothing else. It's sole role is to smooth the transfer of goods by exchanging market specific accepted norm. Credit is something entirely different than money. Credit is based on trust, not hard exchanges.

[@daniel987878]

the lending side of banks is regulated by capital requirements, the deposit side is regulated by reserve requirements

[@kjr63]

She suggests quantity theory is M = P? As far as i know it's MV = PT, there is 4 vatiables.

[@laskji]

Question: What is the role of the money I put in my saving account or checking account, if it is not on-lent to other people?

[@iwill9131]

In a debt-based currency cycle, the biggest venture of monetarists is deciding how much influence monetary velocity has on monetary value. Which is inherently silly because the problem is the debt-based currency itself; likened to the act of trying to provide recuperation for a severed limb with a butterfly bandage instead of cauterizing the wound and applying a tourniquet to staunch the bleeding and applying penicillin to remove infection. This is why people like Hayek, who also won a Nobel Prize for his work in monetary policy/economics, stated that the study should be taken back to base. Hayek understood that people had been indoctrinated into a system of economic slavery via debt currencies and in order to make the necessary changes, tried to get people to think and alter their inherent beliefs about "money" from where people like Keynes had misled them with peppy one-liners backed by government cronies like "Boost aggregate demand!" and "Animal Spirits!"

[@se7ensnakes]

+i Will Well said. I like to read comments from people that know that the system is corrupt

[@JamBos11]

This video is right on. Every single point

[@MrMarc1504]

Money is endogenous to the economic system. It is demand-led and credit-driven. No money can be created if it has not been demanded by a creditworthy borrower who has accepted to pay back his loan later in exchange of a mere IOU. It is as simple as that.

[@nabilassir]

Clear and simple 4 minutes explanation here and an answer to your question, Lyndon @ you tube: type "Simple Solution to the Debt Crisis (No Music)"

[@jstncbllr]

Your deposits give them a reason to charge you monthly fees, etc. :) OK simplistically: All banks have an account at central bank to track their reserve balance. It has to remain positive. If you withdraw $100, then the bank's reserves decrease $100. It can make up for loss with net new deposits or by borrowing from other banks. In theory we could have a bank whose *only* deposits come from making loans. It would borrow to cover reserve shortfalls caused by withdrawals, checks, etc.

[@nthperson]

One distinction (perhaps without a difference) is that a commercial bank that does not have sufficient cash on hand with which to make loans must go into the credit markets to obtain the necessary funds or go to the central bank. The issuance of new shares of stock or sale of shares held in portfolio will raise cash, which can then be loaned out. When the bank borrows from other banks, issues bonds or borrows from the central bank, the bank must record a corresponding liability. Regulation then determines the permitted ratio between assets, liabilities and capital. Keynes, in describing the money production economy is really what ought to be described as a "financial tranactions" economy. Real wealth -- real capital goods and consumer goods -- are produced, of course, but an increasing part of all economies is diverted to the gambling casino that is the markets for equities, bonds, land and collectibles. Monetary reformers, all of whom recognize that the existing system is based on privilege and fraud, offer widely differing solutions. Some argue that governments should have the sole power to spend money into circulation (i.e., create debt free money). Others argue for free banking, with each bank issuing its own currency exchangeable based on public confidence in the bank of issuance. Also, there are those of us who still cling to the idea that receipt money, such as that issued in the 1600s by the Bank of Amsterdam, is the only practical solution.

[@tobyhdr]

Reserves. The money system we have is called Fractional Reserve Banking. FRACTIONAL. This means that banks must have some fraction of the amount they LEND INTO EXISTENCE held in reserve. The money they 'store' for us, their debts to their customers, is their reserves. However, I believe in the UK this reserve amount can be 0%. I think this is true of Canada too. Ben Bernanke suggested a couple of years ago that the US should have a 0% reserve ratio. Typically people talk of a 1:10 ratio though.

[@Jesus-kt5dc]

*If they're saying 0% reserve ratio, wouldn't that make fractional reserve banking Bull Shit? Just a thought.*

[@tobyhdr]

Please read David Graeber's "Debt, the First 5000 Years". Economics still has to yield a lot of ground on the emergence of money, which, Graeber argues, had nothing to do with the difficulties of double coincidence of wants and barter. If you can find a translation of "Eigentum, Zins und Geld" (Property, Interest and Debt) by Heinsohn and Steiger, there is enormous evidence to support Graeber's position - there never has been a 'pure' exchange/barter economy.

[@daniel987878]

sometimes banks create money when they lend at other times they dont create money by lending out their reserves/deposits

[@kingofthepaupers]

They really may not lend out new credits until someone deposits old ones; so even they are taken in by the con in the vault. They know deposits of old chips must go into the vault before loans may come out and wrongly presume it’s the old chips that went in coming back out! A law making savings a requirement before lending is why they spout the nonsense that banks that create money are waiting for savings before they can lend. Unlike a piggy bank which lends out the actual old deposit.

[@mjcbakker]

Every medium of exchange will cause lack of it as people are different, experiences more difficulties or advantages then others. As real cost prices can only be estimated before investments are done for people, companies, governments and banks we will 100% know for sure that people will underestimate risks, run short, have debts, go for loans. If making money yourself is prohibited we are sure we get into a debt based economy again. So in the long run there's only 1 option to avoid capital destruction and real property destruction: LEAVE MONEY!! Go for a WORLD WITHOUT MONEY! Give, share, don't demand (groups of) others to give more than you gave them by charging interest... O yes, let's make it happen before World War 3

[@daniel987878]

They have to hold a fraction of their deposits as reserves not a fraction of what they lend. internationalmonetary.wordpressdotcom

[@furryfan420]

Its only role is to fulfill banking regulations, there's a reason all the banks wanted to get out of transactional and commercial and into investment.

[@kingofthepaupers]

That saving is necessary before you can have investment is absolute nonsense if banks can create money. Jct: But they believe it! A piggy bank needs savings before it can lend but a casino bank does not before it lends out new chips. But make up a law that the casino bank may not lend out new chips until someone deposits old chips and all will believe they’re waiting to borrow the old chips being deposited; thus hiding the fact they’re getting new credits and hiding the true source of money.

[@jag0937eb]

liar

[@douglasbroccone3144]

All due respect. Savings should derermine interest and we should regress and back away from Neo-Keynesian profligacy before negative rates engulf the globe.... Printing money from nothing isn't banking , its counterfeiting.

[@moon12349100]

sorry but its just too boring..

[@Jesus-kt5dc]

*6:55*