Positive Money videos

[Compassionist]

http://positivemoney.org/videos/introduction/ has some videos on money. What do you think of them? Is financial reality really as they are portraying it to be? Thank you.

[Nick]

Sadly not. They don't seem to understand the economy, and their ideas are extremely dangerous. Not to be trusted!

[Compassionist]

Sadly not. They don't seem to understand the economy, and their ideas are extremely dangerous. Not to be trusted!

Thank you Nick. They claim that when someone borrows money from a bank that money is just created by typing numbers into the bank's computer. Is that true? If it's false, how can they make such claims?

[Nick]

What they haven't said, is that when you repay the money, then it is effectively destroyed. And there are limits within the system, or banks couldn't go bust, could they?

They have also got QE completely and dangerously wrong.

[Compassionist]

What they haven't said, is that when you repay the money, then it is effectively destroyed. And there are limits within the system, or banks couldn't go bust, could they?

They have also got QE completely and dangerously wrong.

Actually they did say that when the money is repaid the money is destroyed. In what way did they get Quantitative Easing wrong? Thank you.

[Alan H]

Sadly not. They don't seem to understand the economy, and their ideas are extremely dangerous. Not to be trusted!

Thank you Nick. They claim that when someone borrows money from a bank that money is just created by typing numbers into the bank's computer. Is that true? If it's false, how can they make such claims?

Yes, it's true. Money is little more than a figment of our imagination.

[Compassionist]

Sadly not. They don't seem to understand the economy, and their ideas are extremely dangerous. Not to be trusted!

Thank you Nick. They claim that when someone borrows money from a bank that money is just created by typing numbers into the bank's computer. Is that true? If it's false, how can they make such claims?

Yes, it's true. Money is little more than a figment of our imagination.

LOL. Is this video https://www.youtube.com/watch?time_cont ... 4WmDoYJhnk right about why how prices are so high?

Is this video https://www.youtube.com/watch?v=4l06RhFoLE4 right about £445 billion being wasted?

[Nick]

A bit of economics to try to explain things in simple terms.

MV = PT Where M is the supply of money, V is velocity, the speed at which it goes round the economy, P is the price level and T is the number of transactions.

In a recession, we see M fall as loans are repaid and fewer loans taken out. People also save more, so V slows down. Because of this, T falls, and/or the pric level drops.

M is divided into different types, from M4 (the widest category) to M0 (notes and coins etc., very roughly 3% of the money supply)

QE works by increasing M4 , so that prices don't collapse and the economy fall into recession. Falling prices are very destructive, and hard to correct. That's why the inflation target is 2%, not 0%.

By using QE, M is maintained, so that P and T are less affected.

Under QE, the Bank of England buys gilts and bonds, thereby reducing their yields, and putting money into the banking system. The BoE is increasing M4. This pushes transactions wider along the risk curve, so that banks lend more, instead of taking flight to safety.

If the government just "prints money", this increases M0. As people spend it, it diffuses into M4.

But what happens when V recovers? It supercharges the economy, increasing P dramatically. We are talking 2-3 digit inflation levels here...

But under QE, as the economy recovers, the BoE can sell the gilts and bonds back into the economy, unwinding the stimulus. But if they had just printed money and spent it in the real economy, the only way to recover to get it back would be to cut the spending and increase tax dramatically. So the magic money tree just leads to higher taxes.

QE is reversible; recovering printed money spent is not.

Modern Money are advocating a system which will end in tears.

Hope that helps.

[Nick]

Thank you Nick. They claim that when someone borrows money from a bank that money is just created by typing numbers into the bank's computer. Is that true? If it's false, how can they make such claims?

Because anyone can say anything on the internet! It's false. If all banks had to do is print money, how could they ever go bust?

Is this video https: //www.youtube.com/watch?time_continue=5&v=Y4WmDoYJhnk right about why how prices are so high?

Not really. And much more worrying is their "solution", which wouldn't solve anything.

Is this video https://www.youtube.com/watch?v=4l06RhFoLE4 right about £445 billion being wasted?

No!

[Compassionist]

A bit of economics to try to explain things in simple terms.

MV = PT Where M is the supply of money, V is velocity, the speed at which it goes round the economy, P is the price level and T is the number of transactions.

In a recession, we see M fall as loans are repaid and fewer loans taken out. People also save more, so V slows down. Because of this, T falls, and/or the pric level drops.

M is divided into different types, from M4 (the widest category) to M0 (notes and coins etc., very roughly 3% of the money supply)

QE works by increasing M4 , so that prices don't collapse and the economy fall into recession. Falling prices are very destructive, and hard to correct. That's why the inflation target is 2%, not 0%.

By using QE, M is maintained, so that P and T are less affected.

Under QE, the Bank of England buys gilts and bonds, thereby reducing their yields, and putting money into the banking system. The BoE is increasing M4. This pushes transactions wider along the risk curve, so that banks lend more, instead of taking flight to safety.

If the government just "prints money", this increases M0. As people spend it, it diffuses into M4.

But what happens when V recovers? It supercharges the economy, increasing P dramatically. We are talking 2-3 digit inflation levels here...

But under QE, as the economy recovers, the BoE can sell the gilts and bonds back into the economy, unwinding the stimulus. But if they had just printed money and spent it in the real economy, the only way to recover to get it back would be to cut the spending and increase tax dramatically. So the magic money tree just leads to higher taxes.

QE is reversible; recovering printed money spent is not.

Modern Money are advocating a system which will end in tears.

Hope that helps.

That's brilliant. Thank you for clearing that up for me Nick.

[Compassionist]

Thank you Nick. They claim that when someone borrows money from a bank that money is just created by typing numbers into the bank's computer. Is that true? If it's false, how can they make such claims?

Because anyone can say anything on the internet! It's false. If all banks had to do is print money, how could they ever go bust?

Is this video https: //www.youtube.com/watch?time_continue=5&v=Y4WmDoYJhnk right about why how prices are so high?

Not really. And much more worrying is their "solution", which wouldn't solve anything.

Is this video https://www.youtube.com/watch?v=4l06RhFoLE4 right about £445 billion being wasted?

No!

Thank you very much clarifying it.

[animist]

Nick, as you know, it is a long time since I studied economics, but thanks for reminding me about MV=PT - such happy days! I remember the logic stuff from PPE but not so much of the economics. Anyway, one query. QE is presented as something new, yet I DO remember learning way back that buying up bonds was one way in which governments combated recessions - yes? IIRC, the problem with all these monetary dodges was that they did not work if interest rates were already very low, as now - and that is why Keynes advocated non-monetary measures like spending on public works projects

[Nick]

Nick, as you know, it is a long time since I studied economics, but thanks for reminding me about MV=PT - such happy days! I remember the logic stuff from PPE but not so much of the economics.

Ah! So that's what accounts for it!

Anyway, one query. QE is presented as something new, yet I DO remember learning way back that buying up bonds was one way in which governments combated recessions - yes?

Hmmm... I don't think QE as a concept is particularly new. It's just that deflation hasn't been a problem in recent history until 2008.

IIRC, the problem with all these monetary dodges was that they did not work if interest rates were already very low, as now - and that is why Keynes advocated non-monetary measures like spending on public works projects

Hmmm... There is no need for QE if rates can be lowered. It's only when they reach rock-bottom that QE is relevant. Interest rates are pushed lower further out along the yield curve.

As for Keynes, the central idea is more that spending should not be cut to cure short-term budget cyclical deficits (as happened in the 1930's). It's a short term stabiliser mechanism. And there can be a case for a capital injection to kickstart economic activity, but lead times are rather too long to be useful for a normal recession. Keynes went on to say that in the good times, public expenditure should be set to provide a surplus to repay debt. That's the bit Gordon Brown forgot! And there is a distinction, of course, between cyclical deficits and structural deficits.

[animist]

it is still mostly witchcraft IMO, Nick, but thanks. Here is a teaser: why is it a tautology that MV=PT?

[Nick]

it is still mostly witchcraft IMO, Nick, but thanks.

as a good humanist, you shouldn't explain things as witchcraft

Here is a teaser: why is it a tautology that MV=PT?

Don't quite see what you are driving at...

[animist]

it is still mostly witchcraft IMO, Nick, but thanks.

as a good humanist, you shouldn't explain things as witchcraft

a humanist can believe in the existence of witchcraft, ie rituals being practised in the belief that they are efficacious

Here is a teaser: why is it a tautology that MV=PT?

Don't quite see what you are driving at...

not driving at anything, I just thought you might explain just why this equation is true and a tautology

[Nick]

not driving at anything, I just thought you might explain just why this equation is true and a tautology

Hmmm... I take it you mean tautological in the philosophical sense, not as used in common parlance, ie is always true, as in an equation, rather than a needless explanation ( a blue ball is blue, say).

Well, MV is another way of expressing PT, as both are another way of expressing the same thing, the total expenditure over a given period.

Does that help...?

[Nick]

A couple of other points. It is not just banks who create "money". If I am supplied widgets on credit , there is precious little difference between that aand me borrowing the money from the bank to pay cash on delivery. In such circumstances, controlling money pound by pound becomes a little difficult.

It is also hard to see how it might work in an open, international economy. There are plenty of instances where foreign currencies are used, US dollars, for example.

And it would contrevene the EU Treaty S123 (IIRC) Good to know that Positive Money must be Brexiteers, then.

[Nick]

It might help to think of banks creating "credit", rather than creating "money" (M4 rather than M0) When the credit is repaid, it disappears. If they printed new bank notes (without destroying them when they are deposited back in the bank) then that would be, well, a licence to print money! And hence, highly inflationary.

At one time all banks printed their own money, but this was just a way of representing the assets they held in capital and on behalf of depositors, not new money as such.

This money lark can be a bit head-scratching at times!

[animist]

not driving at anything, I just thought you might explain just why this equation is true and a tautology

Hmmm... I take it you mean tautological in the philosophical sense, not as used in common parlance, ie is always true, as in an equation, rather than a needless explanation ( a blue ball is blue, say).

Well, MV is another way of expressing PT, as both are another way of expressing the same thing, the total expenditure over a given period.

Does that help...?

not a lot. Look, it is intuitively obvious that increasing M will increase P in some rough and ready way, other things equal. But how do V and T figure here? What is the difference between them? BTW, a tautology is a tautology (another tautology!) and there is no peculiar philosophical meaning to this word - it just denotes a statement which is necessarily true in virtue of the meaning of its terms. But tautologies can be trivially obvious ("eggs is eggs") and much less obvious, as here