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And what happens if when designer is done, Bob gives him half of his "Alice owe's you $50"? He would protest, because he wants money, not another IOU. Unless th

And what happens if when designer is done, Bob gives him half of his "Alice owe's you $50"? He would protest, because he wants money, not another IOU. Unless the designers bank accepts IOUs from the bank of Alice, real money is required. It's the same result: "give me payment in a method my bank trusts. I don't trust Alice, or Bob." This trustworthy bank will need deposits, reserves, or a way to purchase reserves from the Fed when noone else will.

TekMol 4y ago
You bring up the question of how the debt is settled. That is out of the scope of my question. The debt could be settled in any number of ways. For example, Alice could give Bob the $100 she owes him. Or not be settled at all. Or Alice could give Bob something else. However Alice and Bob come to the agreement, that Alice does not owe Bob anything anymore, that settles the debt. My question is if Alice and Bob created money, when they agreed that Alice owes Bob money. If so this money would be destroyed the moment the debt is settled. The statements "money is debt" and "debt is money" come to mind. So if you create debt, do you create money?
- brutusborn 4y ago
  How the debt is settled is essential to the question of whether Alice and Bob can create money. You are theoretically correct when you argue that they can create money via debt, but practically this is not correct. The difference is that in reality, Alice and Bob will need to complete this transaction through some commercial bank vicariously recognized by the Central bank. These banks are recognized because they are (perceived to be?) solvent and follow the rules; and this recognition confers them the right to generate deposits based on loans. Alice and Bob can do the transaction without these banks, but no other party will recognize the money/deposits that this transaction creates. Sure, debt creates money. But the only debt that creates USD is debt that is recognized by US authorities. If it's not recognized, your transaction simply created BobBucks(TM). No-one seems to want BobBucks (besides Alice for some reason).

TekMol 4y ago

You bring up the question of how the debt is settled. That is out of the scope of my question. The debt could be settled in any number of ways. For example, Alice could give Bob the $100 she owes him. Or not be settled at all. Or Alice could give Bob something else. However Alice and Bob come to the agreement, that Alice does not owe Bob anything anymore, that settles the debt. My question is if Alice and Bob created money, when they agreed that Alice owes Bob money. If so this money would be destroyed the moment the debt is settled. The statements "money is debt" and "debt is money" come to mind. So if you create debt, do you create money?

brutusborn 4y ago
How the debt is settled is essential to the question of whether Alice and Bob can create money. You are theoretically correct when you argue that they can create money via debt, but practically this is not correct. The difference is that in reality, Alice and Bob will need to complete this transaction through some commercial bank vicariously recognized by the Central bank. These banks are recognized because they are (perceived to be?) solvent and follow the rules; and this recognition confers them the right to generate deposits based on loans. Alice and Bob can do the transaction without these banks, but no other party will recognize the money/deposits that this transaction creates. Sure, debt creates money. But the only debt that creates USD is debt that is recognized by US authorities. If it's not recognized, your transaction simply created BobBucks(TM). No-one seems to want BobBucks (besides Alice for some reason).