3 ms·
The money supply, ie. the amount of money in existence, fluctuates. Obviously, paper money is only a small fraction of the total amount of money "stored" in che
by morsch 15y ago
The money supply, ie. the amount of money in existence, fluctuates. Obviously, paper money is only a small fraction of the total amount of money "stored" in checking acccounts, etc. Money is created through debt. If nobody is in debt, the amount of money in circulation is much lower otherwise.
Does anyone know how much of the money supply is government debt?
I always get dizzy when I try to understand the monetary system. It seems insane. It really shouldn't work at all.
If you want to get a headache, too, try reading http://en.wikipedia.org/wiki/Money_supply http://en.wikipedia.org/wiki/Money_supply, http://en.wikipedia.org/wiki/Fractional_reserve_banking http://en.wikipedia.org/wiki/Fractional_reserve_banking or watching Money as Debt.
- borism 15y agoI always get dizzy when I try to understand the monetary system. It seems insane. It really shouldn't work at all. you use wrong/incomplete models to describe it (incidentally so do policymakers). try http://en.wikipedia.org/wiki/Modern_Monetary_Theory http://en.wikipedia.org/wiki/Modern_Monetary_Theory for starters.
- RickHull 15y agoMMT has resurged recently in large part due to the evangelizing efforts of Warren Mosler. One of his intros to MMT for the layperson is "7 Deadly Innocent Frauds". For a counterpoint, here is a comprehensive refutation of 7DIF: http://conant.economicpolicyjournal.com/2010/10/refutation-of-mosler-economics-and.html http://conant.economicpolicyjournal.com/2010/10/refutation-o...
- borism 15y agoHaven't heard about Warren Mossler before, but yeah, he does seem pretty important figure in MMT circles. But this so called refutation seems to be totally missing the point. No wonder - it's coming from Austrian. This is like asking Aristotelian about General Relativity. They're Universe apart.
- jganetsk 15y agoGovernment debt and fractional reserve banking are two totally unrelated concepts. The latter is what increases money in circulation. Government debt only increases the debt instruments in circulation. Debt instruments, as far as I know, cannot be used to meet reserve requirements. China, however, has a currency which is pegged to the dollar and backed by the US treasury. As a result, our government debt increases their money supply.
- morsch 15y agoWell, obviously they're not totally unrelated, but I agree they are orthogonal. However, I was asking an honest question, how much of the money generated through fractional reserve banking is public debt? Ie. what's the ratio private/public debt?
- sgoranson 15y agoeih...isn't every dollar a Federal Reserve Note, i.e. the monetization of US debt? I'm pretty sure they're intimately related.