Where Does The Money Come From?

[Smurf]

Folk want more pay, want more holiday's, want to work fewer hours, want to retire at the earliest opportunity, want to pay less tax, want better benefits, want better healthcare, want better education provision from childcare, primary, secondary and university, want more crime prevention and protection, want better roads and public transport...

The list is endless. Surely our expectations are completely over the top?

IMO it's time for society to wake up and smell the coffee.

[Naked Chef]

Originally Posted by Smurf

Folk want more pay, want more holiday's, want to work fewer hours, want to retire at the earliest opportunity, want to pay less tax, want better benefits, want better healthcare, want better education provision from childcare, primary, secondary and university, want more crime prevention and protection, want better roads and public transport...

The list is endless. Surely our expectations are completely over the top?

IMO it's time for society to wake up and smell the coffee.

Feck working for you!!!
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[Dunc89]

Originally Posted by Naked Chef

Feck working for you!!!
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[Smurf]

Originally Posted by Naked Chef

Feck working for you!!!
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That's the thing. Ultimately everyone appears to only be out for number one..

Like those wanting to retire at 60 by being paid by those having to work on until they are 67..

[egb_hibs]

on one level, money comes from enterprise.

at a more abstract level it really gets quite weird - assuming there is a finite supply of the stuff, how does monetary wealth grow
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and what proportion of money in existence is underpinned by real assets - eg gold

[Colr]

Originally Posted by egb_hibs

on one level, money comes from enterprise.

at a more abstract level it really gets quite weird - assuming there is a finite supply of the stuff, how does monetary wealth grow
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and what proportion of money in existence is underpinned by real assets - eg gold

banks make money - they print the stuff.

rememeber Pancho Villa's we idea of printing more of the stuff so everyone would be well off.

[Colr]

From economist Paul Krugman - one of the simplest explanations of the effect of money supply (and by extension monetarism) that I have read.:-

Even baby-sitting can't avoid recessions
SYNOPSIS:

Over the past generation, the U.S. economy has grown by about 2.7% in an average year. but just as there are no average families -- how many couples do you know with 1.3 children? -- there have been no average years. Indeed, in six of the past 25 years the economy grew more than 4%, while in five years its output actually declined. If you graph America's gross domestic product over time, you see not a smooth curve but rather a line that wiggles up and down, although it gradually trends upward. Economists call the stretches where that line wiggles down "recessions" and stretches where it wiggles up "recoveries"; and they call the alternation of recessions and recoveries the "business cycle."

The business cycle has been a fact of life for more than a century. Yet every once in a while people begin to imagine that from now on it will be steady growth all the way. The last great outbreak of such optimism was back in the late 1960s, when economists were publishing books with titles like Is the Business Cycle Obsolete?; even Richard Nixon got into the act, promising to "fine-tine" the economy so it wouldn't give anyone a bumpy ride. sure enough, within a few months the nation slid into recession.

But now the "business cycles are obsolete" crowd is back. Over the past few months articles have appeared in practically every major newspaper, insisting that our businessmen have become too smart and our policymakers too sophisticated to make the old mistakes.

How foolish. The inevitability of the business cycle is as near as you can get to an economic law. It has been a feature of ever economy that goes beyond subsistence agriculture, and it is not about to go away. The path of economic growth never did run smoothly, and it never will.

Let me tell you a true story which may explain why.

Back in the early 1970s, a group of families in Washington formed a baby-sitting cooperative -- that is, an arrangement under which couples would baby-sit for each other's children. Such cooperatives are fairly common, but this one had two unusual features: It was bigger than most (containing about 150 couples), and two of its members, Joan and Richard Sweeney, not only understood what was happening but also wrote about it in an article entitled "Monetary Theory and the Great Capitol Hill Baby-Sitting Co-op Crisis."

Such a co-op requires some system to ensure that members do their fair share. Like many co-ops, the Capitol Hill organization used a scrip system. New members were issued a certain number of coupons, each responding to one hour of baby-sitting time. When one couple watched another's children, the baby sitters received the appropriate number of coupons from the baby sittees -- coupons which the sitting couple would then "spend" on some other occasion.

What the co-op eventually discovered, however, was that this system worked only if there were neither too many nor too few coupons in circulation. Couples made decisions both about whether to baby-sit and whether to go out for the evening based on their reserves of coupons. If they had small reserves, couples were reluctant to use them up, preferring to save them for a rainy day; but they were quite willing to baby-sit to build up their hoard. If they had large reserves, they were eager to go out but reluctant to sit.

But one couple's decision to go out was another's opportunity to baby-sit, and vice versa. In the early days of the co-op, it turned out that there was too little scrip in circulation. that meant people were eager to baby-sit but reluctant to go out -- which meant that many people who were willing to baby-sit could not find takers. And the realization that it was hard to find opportunities to replenish their coupons made people even more anxious to save their reserves for special occasions, which made opportunities to baby-sit even scarcer.

Eventually, the people who ran the co-op issued more coupons. The result was a dramatic improvement: More people went out, which meant coupons were easier to earn, which led to even more people going out, and so on. But then, inevitably, they overdid it. Once there were too many coupons in circulation, people became eager to go out, but it became hard to find baby sitters; as people realized that coupons often could not be used, they became even less willing to baby-sit in order to earn them.

What does all this have to do with the business cycle? the baby-sitting co-op was, in effect, a miniature macroeconomy; its problems were simplified versions of the problems faced by the U.S. economy as a whole. In particular, the downward spiral the co-op experienced when there were too few coupons in circulation was a recession -- no more, no less. when America as a whole experiences a slump, the details are more complex, but the principle is the same. And Federal Reserve Chairman Alan Greenspan is simply the man who controls the number of coupons, otherwise known as the money supply.

And here is the crucial point: the managers of the co-op almost never got it right. They did experience a brief "golden age" when the supply of coupons was neither too large nor too small; but that was luck, not skill, and it didn't last.

And if the people trying to manage such a tiny, simple, relatively unchanging economy could not get it right, how can we possibly imagine that the task of keeping that vast, complex, ever-changing organism we call the American economy growing smoothly will be any easier? The job can be done well or badly -- and so far Greenspan has done it pretty well -- but no mere mortal can do it perfectly.

So here is an ironclad forecast: There will be more recessions in the future. Making that forecast isn't hard. In fact, it's childishly simple.


Originally published, 1.30.97

[HaarlemShuffler]

Originally Posted by Smurf

Folk want more pay, want more holiday's, want to work fewer hours, want to retire at the earliest opportunity, want to pay less tax, want better benefits, want better healthcare, want better education provision from childcare, primary, secondary and university, want more crime prevention and protection, want better roads and public transport...

The list is endless. Surely our expectations are completely over the top?

IMO it's time for society to wake up and smell the coffee.

Smurf, I can tell you for sure that NOT all people want more pay, more holidays, work lesser hours, want to retire at earliest opportunity nor all the rest. Only SOME do. And I would tend to avoid those people at all costs given the choice. But I expect there are as many greedy folks around as non-greedy. Or, from your viewpoint, as many industrious folks as non-industrious.

Which is why the article ColR quoted goes some way to explaining why there isn't any one way for any one person or government to say any one way of doing economics is the BEST way... doesn't exist.

Question: do we ALL have to be industrious, hard-working mr angry's just because a significant proportion of the population is?

[Daddy'O'Hibee]

Originally Posted by Smurf

That's the thing. Ultimately everyone appears to only be out for number one..

Like those wanting to retire at 60 by being paid by those having to work on until they are 67..

Can i just settle for seeing 60.
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[egb_hibs]

Originally Posted by Colr

rememeber Pancho Villa's we idea of printing more of the stuff so everyone would be well off.

socialism in a nutshell.

[Bartok]

Originally Posted by egb_hibs

socialism in a nutshell.

Inflationary measures are not the preserve of socialist governments; that remark is quite bizarre. The Weimar hyperinflation of 1923 was nothing to do with socialism. Nor was the Argentinian hyperinflation of more recent times. To mention only two examples.

[HenryLB]

Originally Posted by Dixie Chicken

Inflationary measures are not the preserve of socialist governments; that remark is quite bizarre. The Weimar hyperinflation of 1923 was nothing to do with socialism. Nor was the Argentinian hyperinflation of more recent times. To mention only two examples.

The communists were the only ones who had it as a policy though, were they not?

[Bartok]

Originally Posted by HenryLB

The communists were the only ones who had it as a policy though, were they not?

Talk is cheap; the proof of the pudding is in the actions of government. The Weimar coalition continued the borrowing and money-printing policies of the wartime government, the end result was inevitable.

[HenryLB]

Originally Posted by Dixie Chicken

Talk is cheap;

Weeell, it is and it isn't. Intentions are important. The pressures on the Weimar government were not faced up to, and hyperinflation probably could have been avoided if they had been. But they printed money in order to pay bills. They didn't have an actual defined policy of destroying the value of capital - and along the way ruining a lot of people's lives - by engineering an inflationary scenario.

[Bartok]

Originally Posted by HenryLB

Weeell, it is and it isn't. Intentions are important. The pressures on the Weimar government were not faced up to, and hyperinflation probably could have been avoided if they had been. But they printed money in order to pay bills. They didn't have an actual defined policy of destroying the value of capital - and along the way ruining a lot of people's lives - by engineering an inflationary scenario.

The intentions of the Weimar government were to honour the Treaty of Versailles by paying the ludicrous reparations demanded by the Allies; this policy was the same in effect as destroying the value of capital. It ruined people's lives, as inevitably it would.

I don't know if the aim of socialism was ever to ruin people's lives; in fact I am sure it was never such. If that was the effect, it was not the intention.

[Naked Chef]

Originally Posted by HaarlemShuffler

Smurf, I can tell you for sure that NOT all people want more pay, more holidays, work lesser hours, want to retire at earliest opportunity nor all the rest. Only SOME do. And I would tend to avoid those people at all costs given the choice. But I expect there are as many greedy folks around as non-greedy. Or, from your viewpoint, as many industrious folks as non-industrious.

Which is why the article ColR quoted goes some way to explaining why there isn't any one way for any one person or government to say any one way of doing economics is the BEST way... doesn't exist.

Question: do we ALL have to be industrious, hard-working mr angry's just because a significant proportion of the population is?

I take exception to that comment. I would love to earn more money but work less hours and not have to work until I was 65. Wouldnt most people? That does not make me selfish, greedy, lazy or a bad person. I am kind and generous and not afraid of hard work - I currently work two jobs with overtime (because I need to, not because I want to).

AND - please be assured that after five minutes in my company you would not have me on you list as "ones to be avoided at all costs".

Hurrumph!

[HenryLB]

Originally Posted by Dixie Chicken

The intentions of the Weimar government were to honour the Treaty of Versailles by paying the ludicrous reparations demanded by the Allies; this policy was the same in effect as destroying the value of capital. It ruined people's lives, as inevitably it would.

I don't know if the aim of socialism was ever to ruin people's lives; in fact I am sure it was never such. If that was the effect, it was not the intention.

Socialism maybe. But I think there was a very definite strand in communism that wanted to ruin certain people's lives. After all Lenin spent enough time exhorting the masses into "merciless war against the kulak! Death to him!" Sounds like a pretty clear intention to me.

Actually, thinking about it, I think socialism - in as much as one can separate its early development from communism anyway - has a pretty vicious edge to it as well. Socialists always seem to be runners up just behind the far right and religious wingnuts for the violence of their language anyway.

[Colr]

Originally Posted by Dixie Chicken

Inflationary measures are not the preserve of socialist governments; that remark is quite bizarre. The Weimar hyperinflation of 1923 was nothing to do with socialism. Nor was the Argentinian hyperinflation of more recent times. To mention only two examples.

pancho misunderstood the effect of money supply on price. Thatcher screwed up on this as well. Its a tricky policy best avoided.

[egb_hibs]

Originally Posted by Dixie Chicken

Inflationary measures are not the preserve of socialist governments; that remark is quite bizarre. The Weimar hyperinflation of 1923 was nothing to do with socialism. Nor was the Argentinian hyperinflation of more recent times. To mention only two examples.

I don't mean in the literal sense of printing money C, I mean more in the abstract sense that you can somehow continue to improve overall wealth by blanket redistribution of money.

[HaarlemShuffler]

Originally Posted by Naked Chef

I take exception to that comment. I would love to earn more money but work less hours and not have to work until I was 65. Wouldnt most people? That does not make me selfish, greedy, lazy or a bad person. I am kind and generous and not afraid of hard work - I currently work two jobs with overtime (because I need to, not because I want to).

AND - please be assured that after five minutes in my company you would not have me on you list as "ones to be avoided at all costs".

Hurrumph!

Mmm, my mistake with the wording...

All I meant was that someone who was so preoccupied with wanting that long list of things would be a very unhappy malcontent. Of course, we all would like to have all those things, but few of us pursue them to the extent of sacrificing normal 'now' things like relationships, relaxation, etc in order to achieve them.

eg: a businessman who has no time for his family cos he spends too many hours at work, a trade unionist who spends ALL his time in protracted negotiations, etc.

Sorry if my intent was not clear, and I see how you could interpret it that way
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