11 ms·

Currency is debt. If you have a 20$ bill that means essentially that the government owes you the equivalent in value. If everyone converted all their debt to cu

Currency is debt. If you have a 20$ bill that means essentially that the government owes you the equivalent in value. If everyone converted all their debt to currency that just means the state buys all the debt and prints sufficient government IOU’s (bills) along the way. If there is not enough value to cover the debt, the notes just lose value as others refuse to trade them at their previous rate.

posix_me_less 8y ago
> If you have a 20$ bill that means essentially that the government owes you the equivalent in value. This may be true in some theoretical sense, but in practice, it is hard to believe. How would I go around to make the government accept my 20$ and give me some equivalent of that? What could government possibly give me for my 20$? Dollar bills are for buying things. I could go to a store and buy a bottle of expensive wine for that bill. But I wouldn't say the store owes me.
- jganetsk 8y ago
  "I could go to a store and buy a bottle of expensive wine for that bill. But I wouldn't say the store owes me." That's a misunderstanding. A $20 bill is the government's liability, not the store's liability. You and a third party are using government liabilities as a currency. Every $20 bill is on the liability side of the central bank's balance sheet. Every entity accepts its own liabilities as a form of payment. Governments issue currency which they then must accept as payment for taxes. Banks issue credit which they then must accept as payment for debt service. https://www.youtube.com/watch?v=TDL4c8fMODk https://www.youtube.com/watch?v=TDL4c8fMODk
  - posix_me_less 8y ago
    Interesting video, but can't help to notice it paints too simple and dandy picture and probably has an agenda behind it. If you read the comments, not everybody believes in this "the government created the money so there is no problem in creating some more" idea. In principle yes, the government has that power. But in practice, this is being prevented by powerful people in and out of government and only gets a pass in special cases (like saving the big banks yes, funding public healthcare no).
- moreira 8y ago
  The answer is gold. Your $20 is worth a certain amount of gold, and that is what the government owes you. $20 in gold. These days you'd be hard pressed to get the government to give you gold, of course, but that is the answer to your question. As an example, British pound notes have the wording "I promise to pay the bearer on demand the sum of five [ten/twenty/fifty] pounds", which dates back to a time when you could actually exchange the notes themselves for gold.
  - claytonius 8y ago
    Not quite... https://www.history.com/this-day-in-history/fdr-takes-united-states-off-gold-standard https://www.history.com/this-day-in-history/fdr-takes-united...
  - nitrogen 8y ago
    This used to be more literally true: https://en.m.wikipedia.org/wiki/Silver_certificate_(United_States) https://en.m.wikipedia.org/wiki/Silver_certificate_(United_S...
- asadjb 8y ago
  The government accepts the $20 as a legal way to pay your taxes, or other government fees.
  - posix_me_less 8y ago
    That is true. But if the only way a government owes me something is that it has to accept dollar bills to erase my tax/fee duty, then I think this proves my point - the government does not owe me equivalent of those bills, it only has to accept them for limited set of "services".
barrkel 8y ago
Currency is physical tokens of value for trading money. Money is a system that fulfills several criteria: unit of account, medium of exchange and store of value. Not debt in any meaningful sense, apart from systems that lack trust for store of value or stability for unit of account, in which case explicitly linking to another less easily gamed asset is supposed to increase trust. Debt can be money if the legal system is sound. But money doesn't need to be debt if the money issuer is trusted not to debase the currency.
deleted 8y ago
[deleted]
belorn 8y ago
> If you have a 20$ bill that means essentially that the government owes you the equivalent in value As the book delves into, it may actually be the opposite. A bank borrows the original 20$ from the government. This allows the bank to create a 20$ bank note to be loaned out, and as long the government doesn't demand their money back, it can continue circulating in the economy. The bank notes get traded and becomes the currency, which is how many paper money currencies was created according to the book. The problem arrives then when a single nation has bank notes from several different banks, so in order to solve that problem the government then grants a single bank, let's call it a central bank, the monopoly of borrowing money from the government from which all the other banks then borrow from. A key point here is that the central bank can not be part of government in this scheme since then it would be the government borrowing money from itself. When people talk about money as an illusion, this is one of the larger aspects to it.
Someone 8y ago
”If you have a 20$ bill that means essentially that the government owes you the equivalent in value” That was true in the days of the gold standard (https://en.wikipedia.org/wiki/Gold_standard https://en.wikipedia.org/wiki/Gold_standard), but nowadays, i don’t think it is true anymore. You can’t bring your 20$ bill to the government and get goods in return whenever you want to make such an exchange. Also, a lot of money gets created by banks, not the government (in the USA, all the money, I think. Isn’t the Fed independent?)
- posix_me_less 8y ago
  > a lot of money gets created by banks Interesting, how does that work? Can a bank create money to pay its own taxes? That sounds too convenient...
  - Someone 8y ago
    They could (think of it: a bank could just tell government that it has more money in the bank now, or tell another bank that they transferred an x amount to the government’s account there), but regulations forbid it and various controls work hard to prevent it. A bank creates money when it borrows you money that isn’t fully backed by saving account(s). See https://en.m.wikipedia.org/wiki/Fractional-reserve_banking https://en.m.wikipedia.org/wiki/Fractional-reserve_banking, which, a.o. says: ”Because banks hold reserves in amounts that are less than the amounts of their deposit liabilities, and because the deposit liabilities are considered money in their own right, fractional-reserve banking permits the money supply to grow beyond the amount of the underlying base money originally created by the central bank.” The amount by which a bank can do that is regulated, and, in the end, under control of the central bank. The central bank won’t be involved in every minor fluctuation of the amount of money in circulation, though.

posix_me_less 8y ago

> If you have a 20$ bill that means essentially that the government owes you the equivalent in value. This may be true in some theoretical sense, but in practice, it is hard to believe. How would I go around to make the government accept my 20$ and give me some equivalent of that? What could government possibly give me for my 20$? Dollar bills are for buying things. I could go to a store and buy a bottle of expensive wine for that bill. But I wouldn't say the store owes me.

jganetsk 8y ago
"I could go to a store and buy a bottle of expensive wine for that bill. But I wouldn't say the store owes me." That's a misunderstanding. A $20 bill is the government's liability, not the store's liability. You and a third party are using government liabilities as a currency. Every $20 bill is on the liability side of the central bank's balance sheet. Every entity accepts its own liabilities as a form of payment. Governments issue currency which they then must accept as payment for taxes. Banks issue credit which they then must accept as payment for debt service. https://www.youtube.com/watch?v=TDL4c8fMODk https://www.youtube.com/watch?v=TDL4c8fMODk
- posix_me_less 8y ago
  Interesting video, but can't help to notice it paints too simple and dandy picture and probably has an agenda behind it. If you read the comments, not everybody believes in this "the government created the money so there is no problem in creating some more" idea. In principle yes, the government has that power. But in practice, this is being prevented by powerful people in and out of government and only gets a pass in special cases (like saving the big banks yes, funding public healthcare no).
moreira 8y ago
The answer is gold. Your $20 is worth a certain amount of gold, and that is what the government owes you. $20 in gold. These days you'd be hard pressed to get the government to give you gold, of course, but that is the answer to your question. As an example, British pound notes have the wording "I promise to pay the bearer on demand the sum of five [ten/twenty/fifty] pounds", which dates back to a time when you could actually exchange the notes themselves for gold.
- claytonius 8y ago
  Not quite... https://www.history.com/this-day-in-history/fdr-takes-united-states-off-gold-standard https://www.history.com/this-day-in-history/fdr-takes-united...
- nitrogen 8y ago
  This used to be more literally true: https://en.m.wikipedia.org/wiki/Silver_certificate_(United_States) https://en.m.wikipedia.org/wiki/Silver_certificate_(United_S...
asadjb 8y ago
The government accepts the $20 as a legal way to pay your taxes, or other government fees.
- posix_me_less 8y ago
  That is true. But if the only way a government owes me something is that it has to accept dollar bills to erase my tax/fee duty, then I think this proves my point - the government does not owe me equivalent of those bills, it only has to accept them for limited set of "services".

barrkel 8y ago

Currency is physical tokens of value for trading money. Money is a system that fulfills several criteria: unit of account, medium of exchange and store of value. Not debt in any meaningful sense, apart from systems that lack trust for store of value or stability for unit of account, in which case explicitly linking to another less easily gamed asset is supposed to increase trust. Debt can be money if the legal system is sound. But money doesn't need to be debt if the money issuer is trusted not to debase the currency.

deleted 8y ago

[deleted]

belorn 8y ago

> If you have a 20$ bill that means essentially that the government owes you the equivalent in value As the book delves into, it may actually be the opposite. A bank borrows the original 20$ from the government. This allows the bank to create a 20$ bank note to be loaned out, and as long the government doesn't demand their money back, it can continue circulating in the economy. The bank notes get traded and becomes the currency, which is how many paper money currencies was created according to the book. The problem arrives then when a single nation has bank notes from several different banks, so in order to solve that problem the government then grants a single bank, let's call it a central bank, the monopoly of borrowing money from the government from which all the other banks then borrow from. A key point here is that the central bank can not be part of government in this scheme since then it would be the government borrowing money from itself. When people talk about money as an illusion, this is one of the larger aspects to it.

Someone 8y ago

”If you have a 20$ bill that means essentially that the government owes you the equivalent in value” That was true in the days of the gold standard (https://en.wikipedia.org/wiki/Gold_standard https://en.wikipedia.org/wiki/Gold_standard), but nowadays, i don’t think it is true anymore. You can’t bring your 20$ bill to the government and get goods in return whenever you want to make such an exchange. Also, a lot of money gets created by banks, not the government (in the USA, all the money, I think. Isn’t the Fed independent?)

posix_me_less 8y ago
> a lot of money gets created by banks Interesting, how does that work? Can a bank create money to pay its own taxes? That sounds too convenient...
- Someone 8y ago
  They could (think of it: a bank could just tell government that it has more money in the bank now, or tell another bank that they transferred an x amount to the government’s account there), but regulations forbid it and various controls work hard to prevent it. A bank creates money when it borrows you money that isn’t fully backed by saving account(s). See https://en.m.wikipedia.org/wiki/Fractional-reserve_banking https://en.m.wikipedia.org/wiki/Fractional-reserve_banking, which, a.o. says: ”Because banks hold reserves in amounts that are less than the amounts of their deposit liabilities, and because the deposit liabilities are considered money in their own right, fractional-reserve banking permits the money supply to grow beyond the amount of the underlying base money originally created by the central bank.” The amount by which a bank can do that is regulated, and, in the end, under control of the central bank. The central bank won’t be involved in every minor fluctuation of the amount of money in circulation, though.