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If I was able to create new energy out of nowhere in my bare hands, you would be astounded. Of course this is not possible. Energy must come from somewhere else

If I was able to create new energy out of nowhere in my bare hands, you would be astounded. Of course this is not possible. Energy must come from somewhere else. When you create new money, you have seemingly "new energy" in your hands, except the value of that "new money" came from everyone else's money, the existing base. Their money became worth less (inflation). The government is constantly creating more money, which is why we consistently have inflation year after year. They do it in the name of stimulating the economy. They've done it so much, that many governments now have 0 or negative interest rates on their bonds. This is when things start getting very confusing, because saving money should yield you a positive return. Your savings account should pay you interest, but instead you pay the bank to store your money (doesn't actually happen at the retail level, banks eat the cost to keep you in their business). The "social contract" aspect is that if you want something, you ask for it. Raise taxes? Lower taxes? At least there is representation at some level with a vote. Going to war in Iraq? Needs congressional and senate approval. Creating $100b of money you don't have and buying government bonds every month? Fed does this, and nobody blinks.

SantalBlush 5y ago
I'm aware of how money works, and it is nothing like energy. This analogy doesn't work at all. Money is not the same thing as economic output; it just divides that economic output. The explanation here about "new energy" is quasi intellectual gibberish. Moreover, most monetary expansion is caused by private banks through lending; they don't need a central bank to do this. The central bank uses tools like reserve requirements and bond purchases/sales to raise and lower the money supply in response to macroeconomic trends. Without a central bank, the money supply can still be expanded.
- NoItsznot 5y ago
  Registered just to comment I found the energy explanation of money very insightful. Not sure who you are or why you get to be a judge of intellect but that sentiment was not quasi intellectual gibberish, it was actually a highly nuanced and great visual representation of how money flows and is used. Stop gate keeping.
- coralreef 5y ago
  > Money is not the same thing as economic output; it just divides that economic output. The explanation here about "new energy" is quasi intellectual gibberish. Money stores the value of that economic output. We used to use gold as money because it was hard to inflate. No one can create gold without doing work, therefore it evolved over time to be valuable because of its rarity. That makes it a strong store of value over time, unlike say apples or oil, which would be poor money. Fiat currency can be created without work; it is not rare, you are at the whims of whoever has the power to create it. If you had to store value over 100 years, you would not keep it in cash or bonds. You'd buy land, gold, or possibly stocks, because those things are much harder to create. > Moreover, most monetary expansion is caused by private banks through lending; they don't need a central bank to do this. The central bank uses tools like reserve requirements and bond purchases/sales to raise and lower the money supply in response to macroeconomic trends. Without a central bank, the money supply can still be expanded. Private banks implement whatever the central bank tells them. Who sets the interest rate? Does a lower interest rate increase private lending or decrease it? Why can't private banks hold 0% in fractional reserve?
  - cinquemb 5y ago
    > Money stores the value of that economic output. One must also consider whether it is a medium of exchange at any given point in time, if its used as an unit of account, the variable storage/protection/transportation costs, durability against the elements, fungibility, accessibility, liquidity, etc. > Who sets the interest rate? Does a lower interest rate increase private lending or decrease it? Why can't private banks hold 0% in fractional reserve? Take a look at "5% fixed-floating swap, Receive fixed"[0], who sets those float-fixed (or even the float-float) swap rates for the myriad of financial instruments, mostly in bilateral transactions with no third party involvement, that start at zero initial value and supposedly yield a non zero number, ever involving in complexity in response to demand and outside the awareness and interests of most people despite being very integral to their daily lives? Hint: by far, not just central banks (which at least in the US are owned by private banks at different branches)… [0] https://en.wikipedia.org/wiki/DV01#Risk_%E2%80%93_duration_as_interest_rate_sensitivity https://en.wikipedia.org/wiki/DV01#Risk_%E2%80%93_duration_a...

SantalBlush 5y ago

I'm aware of how money works, and it is nothing like energy. This analogy doesn't work at all. Money is not the same thing as economic output; it just divides that economic output. The explanation here about "new energy" is quasi intellectual gibberish. Moreover, most monetary expansion is caused by private banks through lending; they don't need a central bank to do this. The central bank uses tools like reserve requirements and bond purchases/sales to raise and lower the money supply in response to macroeconomic trends. Without a central bank, the money supply can still be expanded.

NoItsznot 5y ago
Registered just to comment I found the energy explanation of money very insightful. Not sure who you are or why you get to be a judge of intellect but that sentiment was not quasi intellectual gibberish, it was actually a highly nuanced and great visual representation of how money flows and is used. Stop gate keeping.
coralreef 5y ago
> Money is not the same thing as economic output; it just divides that economic output. The explanation here about "new energy" is quasi intellectual gibberish. Money stores the value of that economic output. We used to use gold as money because it was hard to inflate. No one can create gold without doing work, therefore it evolved over time to be valuable because of its rarity. That makes it a strong store of value over time, unlike say apples or oil, which would be poor money. Fiat currency can be created without work; it is not rare, you are at the whims of whoever has the power to create it. If you had to store value over 100 years, you would not keep it in cash or bonds. You'd buy land, gold, or possibly stocks, because those things are much harder to create. > Moreover, most monetary expansion is caused by private banks through lending; they don't need a central bank to do this. The central bank uses tools like reserve requirements and bond purchases/sales to raise and lower the money supply in response to macroeconomic trends. Without a central bank, the money supply can still be expanded. Private banks implement whatever the central bank tells them. Who sets the interest rate? Does a lower interest rate increase private lending or decrease it? Why can't private banks hold 0% in fractional reserve?
- cinquemb 5y ago
  > Money stores the value of that economic output. One must also consider whether it is a medium of exchange at any given point in time, if its used as an unit of account, the variable storage/protection/transportation costs, durability against the elements, fungibility, accessibility, liquidity, etc. > Who sets the interest rate? Does a lower interest rate increase private lending or decrease it? Why can't private banks hold 0% in fractional reserve? Take a look at "5% fixed-floating swap, Receive fixed"[0], who sets those float-fixed (or even the float-float) swap rates for the myriad of financial instruments, mostly in bilateral transactions with no third party involvement, that start at zero initial value and supposedly yield a non zero number, ever involving in complexity in response to demand and outside the awareness and interests of most people despite being very integral to their daily lives? Hint: by far, not just central banks (which at least in the US are owned by private banks at different branches)… [0] https://en.wikipedia.org/wiki/DV01#Risk_%E2%80%93_duration_as_interest_rate_sensitivity https://en.wikipedia.org/wiki/DV01#Risk_%E2%80%93_duration_a...