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This is a fairly major economic intervention if they go ahead with it. The big difference (in the report they refer to this as private vs public money), is that

by neffy 4y ago

This is a fairly major economic intervention if they go ahead with it. The big difference (in the report they refer to this as private vs public money), is that they are proposing to issue the equivalent of cash, i.e. Asset money, "public money", rather than the liability deposits, "private money" that are created by the commercial banks, when loans are created, and removed when they are repaid, or defaulted on. The vast majority of transactions today, use bank deposits, "private" money in this rather loaded nomenclature. Because Economics has never really come to grips with how the banking system actually works, there has long been a movement there to replaced the current monetary system, with something that doesn't create and destroy money all the time. Amongst other things, I have seen economists advocate for this, because they believe it would mean that their mathematical models would work properly on the real economy. It is hard to know what the actual economic impact would be, but it is to put it mildly, a little irresponsible to experiment with the production system like this.

jevgeni 4y ago
No it's not. Different types of money is common terminology. Also, no idea how "Economics has never really come to grips with the banking system" - there's enough research and understanding on this.
- throwaway290 4y ago
  Oh yeah, economics. Such a well researched field, so much consensus.
  - jevgeni 4y ago
    The banking system IS well researched. STEM fields also have lack of consensus on different topics.
    - throwaway290 4y ago
      Whataboutism. It's not about STEM a lot of which is abstract and of no direct consequence (especially where there is no consensus) but about something that can impact society and livelihoods directly in unknown ways.
    - orwin 4y ago
      I don't think that's exactly what GP meant. The banking system and the way money really works started being researched quite recently (late 2000s). They are some specialists, but a lot of economists (and especially those you can find on TV or read in the generalist press, but not only) are still stuck on the pre-2000 vision where the money banks lend is from deposits.
    - LukeB42 4y ago
      Oh yeah for sure: https://en.wikipedia.org/wiki/Libor https://en.wikipedia.org/wiki/Libor
      - JumpCrisscross 4y ago
        How is fraud in a commercial index relevant to our understanding of money and central banking? Did the Enron scandal undermine our understanding of steam turbines?
        LukeB42 4y ago
        How is the interbank interest rate being defined on the fly in-mente relevant to our understanding of some large central banks determining their total credit supply by punching some numbers into a computer ex nihilo? Seems similar enough to me. That's how.
        JumpCrisscross 4y ago
        > the interbank interest rate being defined on the fly All prices are determined on the fly, certainly day-to-day ones. Libor wasn’t the interbank rate, it was one commercial offering, albeit a powerful one. The Fed Funds rate always was and now SOFR are transactionally derived, which is fundamentally different from Libor, which was never anything more than a survey.
        LukeB42 4y ago
        There is a finite amount of energy in this universe and yet here we are at "Practically all prices are determined on the fly". This is mere bankster handwaving in lieu of calculating physically intrinsic value for a sufficient number of commodities.
        JumpCrisscross 4y ago
        > a finite amount of energy in this universe and yet here we are at "Practically all prices are determined on the fly" This is a silly comparison. Stars don’t model their fusion output. Particles interact on the fly. There is also no model relating entropy to overnight collateralised borrowing rates. > calculating physically intrinsic value for a sufficient number of commodities Interbank funds aren’t a finite commodity.
  - baidifnaoxi 4y ago
    And so reliable to
- neffy 4y ago
  Actually no, although I agree there is a certainly a lot of research, creating some horribly flawed mathematical models. Essentially with respect to the banking system, economics has built on a false understanding of how it works (fundamentally the incorrect claim that banks lend out their depositors funds), and never gone back to fix that with a correct understanding. So we have the situation that the Bank of England published a memo reiterating how that deposit money is created through lending about 8 years ago now, but there are still papers being published with the incorrect understanding as a basis. And now we have the Bank of England essentially proposing to "solve" that problem by introducing a digital form of asset cash. It will be very interesting to see what goes on the other side of the balance sheet for that.
  - vishnugupta 4y ago
    > fundamentally the incorrect claim that banks lend out their depositors funds To an extent that 2022 Noble prize in Economic dished out this same trope!
    - r3trohack3r 4y ago
      For those of us who want to learn - any good resources/primers on how banks actually work?
      - unmole 4y ago
        Economics of Money and Banking by Perry G Mehrling. Available as a MOOC on Coursera and a YouTube playlist.
        kasey_junk 4y ago
        I really like Mehrling's theories but I think anyone that points to his work should reasonably caveat by saying a) there is not a lot of broad agreement with it in economics circles and b) its describing a system that was dramatically changed by the 2008 financial crisis and the Money View might be found completely wanting before it achieves uptake as a major economic theory. I've not watched the listed course so this shouldn't be seen as a criticism of it, only as context for the theories broadly espoused by Mehrling.
JumpCrisscross 4y ago
> fairly major economic intervention if they go ahead with it It is, though it’s far from unprecedented. Postal banking was a public banking option [1], albeit with balance sheet separation between the monetary authority and public bank. > Economics has never really come to grips with how the banking system actually works This is nonsense. The internet and public having misconceptions about something doesn’t mean we don’t understand it. [1] https://www.investopedia.com/what-is-postal-banking-5217341 https://www.investopedia.com/what-is-postal-banking-5217341

by neffy 4y ago

jevgeni 4y ago

No it's not. Different types of money is common terminology. Also, no idea how "Economics has never really come to grips with the banking system" - there's enough research and understanding on this.

throwaway290 4y ago
Oh yeah, economics. Such a well researched field, so much consensus.
- jevgeni 4y ago
  The banking system IS well researched. STEM fields also have lack of consensus on different topics.
  - throwaway290 4y ago
    Whataboutism. It's not about STEM a lot of which is abstract and of no direct consequence (especially where there is no consensus) but about something that can impact society and livelihoods directly in unknown ways.
  - orwin 4y ago
    I don't think that's exactly what GP meant. The banking system and the way money really works started being researched quite recently (late 2000s). They are some specialists, but a lot of economists (and especially those you can find on TV or read in the generalist press, but not only) are still stuck on the pre-2000 vision where the money banks lend is from deposits.
  - LukeB42 4y ago
    Oh yeah for sure: https://en.wikipedia.org/wiki/Libor https://en.wikipedia.org/wiki/Libor
    - JumpCrisscross 4y ago
      How is fraud in a commercial index relevant to our understanding of money and central banking? Did the Enron scandal undermine our understanding of steam turbines?
      - LukeB42 4y ago
        How is the interbank interest rate being defined on the fly in-mente relevant to our understanding of some large central banks determining their total credit supply by punching some numbers into a computer ex nihilo? Seems similar enough to me. That's how.
        JumpCrisscross 4y ago
        > the interbank interest rate being defined on the fly All prices are determined on the fly, certainly day-to-day ones. Libor wasn’t the interbank rate, it was one commercial offering, albeit a powerful one. The Fed Funds rate always was and now SOFR are transactionally derived, which is fundamentally different from Libor, which was never anything more than a survey.
        LukeB42 4y ago
        There is a finite amount of energy in this universe and yet here we are at "Practically all prices are determined on the fly". This is mere bankster handwaving in lieu of calculating physically intrinsic value for a sufficient number of commodities.
        JumpCrisscross 4y ago
        > a finite amount of energy in this universe and yet here we are at "Practically all prices are determined on the fly" This is a silly comparison. Stars don’t model their fusion output. Particles interact on the fly. There is also no model relating entropy to overnight collateralised borrowing rates. > calculating physically intrinsic value for a sufficient number of commodities Interbank funds aren’t a finite commodity.
- baidifnaoxi 4y ago
  And so reliable to
neffy 4y ago
Actually no, although I agree there is a certainly a lot of research, creating some horribly flawed mathematical models. Essentially with respect to the banking system, economics has built on a false understanding of how it works (fundamentally the incorrect claim that banks lend out their depositors funds), and never gone back to fix that with a correct understanding. So we have the situation that the Bank of England published a memo reiterating how that deposit money is created through lending about 8 years ago now, but there are still papers being published with the incorrect understanding as a basis. And now we have the Bank of England essentially proposing to "solve" that problem by introducing a digital form of asset cash. It will be very interesting to see what goes on the other side of the balance sheet for that.
- vishnugupta 4y ago
  > fundamentally the incorrect claim that banks lend out their depositors funds To an extent that 2022 Noble prize in Economic dished out this same trope!
  - r3trohack3r 4y ago
    For those of us who want to learn - any good resources/primers on how banks actually work?
    - unmole 4y ago
      Economics of Money and Banking by Perry G Mehrling. Available as a MOOC on Coursera and a YouTube playlist.
      - kasey_junk 4y ago
        I really like Mehrling's theories but I think anyone that points to his work should reasonably caveat by saying a) there is not a lot of broad agreement with it in economics circles and b) its describing a system that was dramatically changed by the 2008 financial crisis and the Money View might be found completely wanting before it achieves uptake as a major economic theory. I've not watched the listed course so this shouldn't be seen as a criticism of it, only as context for the theories broadly espoused by Mehrling.

JumpCrisscross 4y ago

> fairly major economic intervention if they go ahead with it It is, though it’s far from unprecedented. Postal banking was a public banking option [1], albeit with balance sheet separation between the monetary authority and public bank. > Economics has never really come to grips with how the banking system actually works This is nonsense. The internet and public having misconceptions about something doesn’t mean we don’t understand it. [1] https://www.investopedia.com/what-is-postal-banking-5217341 https://www.investopedia.com/what-is-postal-banking-5217341