Andrew Booth29 said:The fundamental issue here—and I say this quite bluntly—is that you don't actually grasp what money represents. That’s precisely why your simulation is failing to produce anything remotely coherent. 😁 If every single cent in the entire economy were somehow funneled into one family's hands, the very concept of exchange would vanish. We're talking about goods and services no longer moving through the system. In that scenario, money effectively ceases to exist—because, let's be honest, money only holds value as long as there is active commerce to facilitate. And since we know from basic economic reality that such a total vacuum never occurs... You really ought to walk us through your simulation—if you can—so we can pinpoint exactly where your logic went off the rails. 😁
Look, I don't know much about economics anyway (my grades in class were pretty mediocre). There's no point in looking for mistakes in my work. I already admitted that I don't know how to build a successful long-term economic simulation within an isolated environment.
If you think you can do it, go ahead and try to make one yourself. If you can't, then there wasn't really a reason for you to jump into this conversation.
And I’d appreciate it if we could keep things civil. Throwing around insults like "you don't understand money" doesn't actually help the debate. Just use actual expertise instead of attacking someone's credentials. This topic is genuinely serious.
A while back, I read that they ran into this exact same issue—injecting new currency—back in the Roman Empire. Their fix was to melt down silver coins and mix in cheaper metals. Obviously, the fallout a few hundred years later is easy to see. Their currency ended up being practically worthless. I'll step back from that specific point though, since I'm not a historian and my source might be off.
We're dealing with a problem that's over 2,000 years old. I don't think we're going to solve it by questioning each other's intelligence.
No matter how hard people try to claim I don't understand economics, there are still questions that nobody on this forum seems willing to actually answer.
If economic science is supposedly useful to billions of people, then it should be just as useful to a much smaller, isolated group. So, come on, you PhD economists, show me how you would regulate money within an isolated system. For example, take an isolated community of 10 families. Set up one bank, distribute various jobs among those 10 families with some initial amount of cash held by the bank and each family. Then just show me how that works year after year. The assumption is that every family has a surplus of goods or labor to put on the market. Using that example, explain how a successful family grows and how there is a real increase in the money supply. Leave out population growth for now, though you can try to factor that in later. Assume there are no natural disasters and that we have predictable crop yields and livestock production every single year. Basically, a perfectly stable environment.
So far, not a single person here has even attempted this, even though I brought it up as the core issue at the start of this thread. Everyone brags about being experts and refuses to debate with "ignorant" people, yet they get stuck on a simple hypothetical and have no idea where to go from there.
Look, I'm not asking you to square the circle (scholars know that a perfect result involves infinite decimals). I just want one simulation showing the flow of wealth and prosperity for each family, year by year. Let's assume all families work equally hard.
I tried to design a simulation that would function indefinitely, and it doesn't work. It always turns out that the entire sum of money ends up with one single family due to tiny differences in prices or productivity. That's for a solution without any money printing. And I honestly cannot figure out a fair way to handle money emission in an isolated system.
Well, this is where the doctors of economics can step in and solve the puzzle.
If you can't solve this basic little example, then you certainly can't solve the economic problems of a massive isolated entity like the United States.
Go ahead and insult me personally if you want, but anyone who doesn't know the solution to the task above for an infinite timeframe (even just the first 100 years will do) probably shouldn't brag about their economic expertise or tell others to go read their textbooks.
Because of that, I am asking you to please work on the solution to this incredibly simple task and just focus your arguments there.
Regarding A. Šarović, I’m not saying he’s right about everything or every single solution. He wrote quite a bit in his book, but I was really just focused on one specific connection: how we regulate the influx of new money. Capitalism doesn't have an inherent fix—or maybe it's designed to lack one—which you can see in those recurring cycles of economic booms and busts.
It’s like building a house on a shaky foundation. It can collapse. That's just physics. So, if capitalism is built on the value of money (capital), and that money's value fluctuates from period to period, then you end up with the mess we have now. But, you have to be brave enough to say it: regulating the flow of money isn't working. Here is why, once again. If the value of the US dollar is equal to all products and services divided by the total number of dollars, then as products and services accumulate, the number of dollars has to increase to keep that value constant. And because labor adds value every year, that accumulation happens continuously.
Who doesn't see that?
And if you do see it, then we need a solution. Either we haven't added any value since the mid-90s (which the GDP reports totally contradict) or we're still being foolish and trying to solve a shortage of money—caused by an increase in value—by taking out loans. In that position, the Federal Reserve can easily generate dollars based on international credit to satisfy the demand for issuing currency into the financial system.
The same goes for this: without new dollars, you can't have some people getting richer without others getting poorer. Which would be normal if nobody actually worked.
So, if that's true, then when a major corporation announces they made a massive profit last year, it just means everyone else was impoverished by that exact amount (spread out across many small businesses).
And it will stay this way until the system for issuing new dollars is fixed. Everyone immediately thinks of devaluation. But people finally need to realize that newly created value requires an equal amount of new dollars, so there's no such thing as devaluation in that context.
So, we still don't have a solution, even though one should be codified into law. This implies that the top economists and lawyers who drafted our laws were short-sighted. Or, more accurately, they just followed what everyone else was doing. If nobody else in the world has solved this yet, we aren't suddenly going to be the ones to do it.
Basically, first we have to prove with hard facts that injecting a new quantity of dollars is necessary. Then we find a solution, write it into law, pass it, and start implementing it. It would be good to do this sooner rather than later because we are facing a massive problem.
There is one catch with injecting this money. Whoever controls the injection holds all our newly created value in their hands. If that money is mismanaged, it might just create even bigger problems.
Finally, I'd ask you all to contribute to finding a solution. Everyone is entitled to an opinion, but let's base it on the actual definition of what a dollar is worth.
And anyone who thinks we don't need new dollars to account for accumulated new value should think about how we're supposed to pay back international debt. See, paying back that kind of debt involves pulling dollars out of the system to buy the foreign currency needed for repayment. If those dollars aren't there, the debt can't be paid. And even if there are just enough, having a massive shortage of dollars in the financial system won't do anyone any favors.
I actually reached out to the Federal Reserve regarding the increase in the money supply and a few related issues. After waiting three weeks, here’s the gist of their reply: "Read the Federal Reserve Act and an introductory economics textbook."
I’d describe the response from the Fed representative as the ultimate non-answer. It basically means the person you're talking to either has no clue or is too afraid to speak up.
It’s honestly like asking a local cable technician how to fix a TV where the picture is squashed into a horizontal line, and they just tell you, "Go study electrical engineering, circuit design, and integrated circuits." The response doesn't actually help anyone; it's just a generic brush-off that applies to any question about fixing hardware.
So, I sent a letter over to the finance department at Harvard Business School. Now I'm genuinely curious to see what they come back with. I'll let everyone know once I hear something.
By the way, I’ve been digging through some econ books and skimmed through a free PDF on macroeconomics by an American author, Dietrich Krueger. The only thing I really gathered is that the sheer volume of money isn't the main point. More money leads to higher prices, sure, but there wasn't anything specifically addressing ways to increase the real money supply without relying on bank credit. Pretty interesting stuff.🙂
Regarding the relationship between money and social structures, the humanist Aleksandar Šarović wrote extensively about this a long time ago, and naturally, he didn't find a solution within the framework of capitalism. http://www.sarovic.org/novac.htm If anyone is interested, give it a read.
Look, the point of this thread isn't to win an argument or convince anyone of my side. It's just about using logic to look at how much money actually matters and how any new cash might be injected back into the flow. It’s about shedding some light on how the financial world works. I'm no economist, but all money operations are linear—addition, subtraction, borrowing—so they're pretty easy to break down logically. If someone wants to prove anything regarding how money drives wealth or trade, they should try applying those same rules to an isolated society, like a single family or a small town. If you can prove it works there, then sure, it probably applies to the massive, isolated system we call the USA. Because, let's face it, there aren't any proven intergalactic transactions yet.
If something can't be proven in a tiny village, it's impossible to prove it for the entire planet.
So, the question of issuing new money is still wide open. If it exists, the government probably isn't in a corner, but if it doesn't, we'll end up exactly like that little isolated village with a strictly limited starting amount of cash.
I'm not exactly advocating for printing more money, but looking at the logic, I don't see a solution. Our government can print bills based on credit, but if there isn't enough surplus coming in from abroad to cover our debt payments, then we're clearly in a tight spot. Maybe people remember things like rationing or gas coupons from back in the day. I have a feeling we'll be remembering stuff like that again soon.
The real issue with money is that its whole purpose is exchange. And honestly, I don't have a fix for how to inject new money into that isolated village scenario. No matter how hard the villagers work, their products have zero value if there isn't any money available to buy them. Plus, sooner or later, all the wealth would just gravitate toward whoever was selling their goods at the highest price—or whoever was just way more productive than everyone else. The village wouldn't actually end up wealthier; the wealth would just concentrate in one place. Sounds familiar, doesn't it? 🙂 I wonder if those hands happen to belong to our big bankers.
Andrew Booth29 said:Microsoft doesn't have a monopoly. 😁
I’m done with everything else. 🙄
I don't get how they aren't a monopoly when they literally had to pay millions in fines for monopolistic behavior. Right. They made a few tiny tweaks to their S.A. and released some documents and suddenly, just like that, they aren't a monopolist anymore.
Nicole Collins13 said:Cut the crap. You claimed that added value can't increase without an increase in the money supply, which is just plain wrong. You can talk trash all you want, but that doesn't make what you said any more true.
Money is meant for exchanging value. How do you actually get wealthier through exchange if there isn't more money available to facilitate those trades? You’re just moving someone else's wealth into your own pocket. The total sum stays the same. It’s only when new money enters the system that the total sum can actually grow.
Nicole Collins13 said:Well, that’s where you messed up. It’s like they used to say in the service: "Total nonsense." 😉
Otherwise, I still find it fascinating how people will spend hours arguing on a forum but won't bother reading a single book or a simple booklet like 🙂Modern money mechanics .
I was talking about the total wealth within a country. If there isn't enough money in circulation to actually buy anything, then having wealth in society doesn't mean a thing. It's just pure market law. Basically, money becomes so valuable that it devalues material wealth (like goods and real estate). And since you don't have much of it, you don't really have any value either.
Gregory Williams7 said:The government funds everything it deems necessary. Highway construction, bridges, agricultural subsidies, public sector salaries, even the costs of presidential helicopter trips... Any expense the state incurs can be covered by issuing new currency. Since they hold a monopoly and it is legally established that money serves as the medium of exchange, no one is permitted to complain. The only actual risk is if they overreach, which could drive the entire system into hyperinflation—an outcome nobody desires.
And I cannot agree with you on the idea that the difference between savings and bank credit has no impact on the money supply. It certainly does. 😉Do some research; you will see that the money supply increases several times over once the banks process it.
Can someone here give me a quick rundown on fractional reserve banking? I seem to have forgotten the specifics. 😉It looks simple enough, but it is a complicated little mother fucker.
The gap between savings and credit exists because banks are borrowing on the external market. My take is that a bank can't actually issue a loan unless they've first deposited foreign currency with the Federal Reserve to receive dollars in return. That would imply they'd have to just print the money themselves. And I don't think that's really possible.🙂
Gregory Williams7 said:Here is a blunt, unrefined answer for you:
One portion of newly created money is inflation. This is the capital the government injects into the system through public sector salaries, various subsidies, and social benefits.
The second portion stems from fractional reserve banking. It is essentially the gap between deposits and the loans issued by banks.
The third portion comes from counterfeit currency—the cash that counterfeiters manage to circulate before the authorities detect it.
There. Is that simple enough for you?
First off, I get it, and that’s the most honest way money gets injected. Second, it doesn't actually change the total money supply, just the amount of cash on hand. Third, we can pretty much ignore that.
So, if only the first part is true, then it’s possible the government could take every bit of new value we all create through our labor and pump it right back out via money printing for public sector wages. And the paradox is still a mess. Like, who actually drinks and pays for it? Either what was said above isn't true—meaning the state isn't using the only viable method to circulate money—or they aren't putting that money into public service, but into something else entirely. If that's the case, we’re really in a bind that only a revolution might fix.
Gregory Williams7 said:Your logic holds up perfectly until you reach the conclusion that a crisis is triggered by overproduction. Specifically:
It was mentioned just the other day that the 1929 crash in the USA was caused by an oversupply of certain goods. This fits my theory quite elegantly. If someone produces a massive surplus and attempts to sell them at previous price points, they can collapse the entire financial system. A system can run out of money. This remains true regardless of how valuable those products actually are.
If someone floods the market with endless products, people will spontaneously strip them of their value. If the manufacturer refuses to lower prices, consumers simply won't buy. For instance, if the market is saturated with iPods, and I buy one while everyone else buys one simultaneously, the value of a new iPod effectively drops to zero because nobody wants to buy another. The more of them people own, the less they are worth.
A system cannot run out of money. As strange as it may sound, injecting money into a system is easy and can be done incredibly fast. However, removing that money from the system? That is an academic nightmare involving several different scientific disciplines.
And then there is this final point... products are only worth what people decide they are worth. Consider the clearest example: an AT&T stock that costs $88 during its IPO, but reaches 400 once it hits the exchange. For it to then drop to 270 or some other number, nothing fundamentally changed within Verizon. It is still the same company with roughly the same earnings. It is simply that the people—on average, not all at once—assigned a different value to that stock.
Hyper-production and pricing don't necessarily have to be linked when you're dealing with a monopoly. Take Microsoft, for instance. They can sell their software in whatever volume they want without any thought about lowering prices. Actually, the price of every new product they release is usually higher. So, based on market postulates, Microsoft should be causing economic instability because hyper-production is happening—there’s no shortage of what they make, except for old stuff—yet the price stays the same or close to it. Basically, wealth just accumulates. Maybe I'm wrong, but it seems like a solid example. But that isn't really the point I'm interested in anyway. Market relationships are so complex that only top-tier mathematicians have managed to solve them and create equations that actually describe how a market works.
The main thing is money as a medium of exchange. Whoever produces that money can basically buy all newly created value for the mere cost of paper, ink, and printing.
The economic side doesn't really interest me. Supply and demand laws dictate product prices. The core issue is the origin of money used for exchange. Let's say we successfully sell products and build in value—price minus costs. That newly created value can then be traded for someone else's money. We can stack that cash, invest it in various ventures, or even lend it out to keep it circulating. However, it’s becoming obvious that money is starting to run out. In a closed system, this is easy to see (think of an imaginary family), and the whole Earth is essentially a globally closed system.
Take that imaginary family I mentioned. If they want to trade their goods using money, they obviously need to have some. But at the start, they don't. They could try something else, like points, but they don't have those either. Someone has to create them. And once they are created, they have to be distributed; otherwise, everyone would have to give up products just to get that money, when in reality, that money is just a medium of exchange. That's the catch: whoever creates all the money holds all the exchangeable value. But they can't just distribute it easily, because you can't have both the sheep and the money at the same time.
The answer to where money comes from has to be timeless, since money has been used for centuries, dating back to the very first empires.
The initial source of money isn't the problem—since paper money is printed based on gold reserves—it's the increase in the money supply itself (especially considering population growth, which is up 20% in 22 years). Whoever injects money into circulation falls into the paradox of my imaginary family example.
I suppose this can be explained in ten sentences. Because the money supply has definitely increased, but how? Was it done through some kind of fraud?
Here is an example to clarify things. Where does milk come from? We could talk about grocery stores, trucks, the dairy industry, farms, and only at the very end arrive at the cows, which existed thousands of years ago long before humans domesticated them for our own use. So, the answer would be that milk comes from cows (goats, sheep, etc.).
It's the same with the money in circulation; we know it comes from a printing press (the farm), but I need someone smart to tell me which specific press that is (in Europe, the USA, China, ...). Because whoever owns that press holds all our newly created value in their hands, and they buy it up for the mere price of paper and printing costs. That is a trillion-dollar question. I'm looking for a sensible, common-sense answer. An expert who can't provide a simple, logical answer in their field might as well throw their degree away. For instance, an electrical engineer should probably hand in their diploma if they can't explain the origin of electrons or the AC current we all use in our homes today.
Answering this question will likely enlighten everyone's understanding of the financial system as we know it today. I haven't found the answer yet, but I suspect the real answer will be truly interesting for all of us.🙂
mistystag0 said:I’ll try to be gentle here. From my perspective, since you seem to have a somewhat naive view of finance, you are making some pretty significant errors.😢
To start with, maybe you could look up some basics on monetary policy: the Bretton Woods agreement and the gold standard, how a central bank maintains its independence, primary versus secondary money issuance, supply and demand, and monetary aggregates.
I guess once you've looked all of that over, you might realize just how much there is left to learn.
LP👋
Seems like maybe you don't have a clue either. Neither do I.😂
We all deal with money. We earn it, we spend it. We know where it gets printed, but the real question is where the money actually comes from. It’s just paper, really, with almost no intrinsic value beyond what’s written on it. There was a time when every bill was backed by gold reserves, but that’s gone now. So how does this whole thing actually function?
After an intro like that, most people probably think I've lost my marbles, but sometimes it’s hard to tell where genius ends and madness begins. Based on my theory—which is just a simple, plain-spoken idea—it can be shown that a government can't go bankrupt if there is actual profit being generated by businesses. Basically, if there is global profit being realized.
The core of the theory lies in newly created value. It’s hard to demonstrate this at a national level, but you can see it within a single household. For instance, the head of the family (regardless of gender, they earn money and hold it). However, if a family member wants to sell something to the head of the house, they ask for money, and that money has to come from the outside. Let’s say Jack is a skilled woodworker and he makes some hay rakes. He asks the head of the family for $33. It makes sense for the head of the family to pay him because the rakes are good and they are needed (by farmers). But the money the head of the family uses comes from elsewhere, so he has to take part of his external earnings and give it to Jack. On the surface, everything seems fine. But here is the paradox. Money is a great medium for exchange, but when dealing with added value, there's a bit of a dilemma. If Jack were a talented painter instead, he could have painted a bill worth $33 and used that to buy the rakes, then sold them back to the head of the family. You’d reach the same result. In both cases, you're creating a product with added value, but the difference is that in the second example, an extra $33 bill has been injected into circulation. Of course, that's illegal, though the first scenario is also technically illegal (unauthorized manufacturing and trade).
So, I've started this thread about how products with added value are valued, and practically every product works this way.
Let me stick with the example. If little Jack were an even better craftsman, he might have built a wooden threshing machine. That’s where the problem starts. The head of the family doesn't have enough cash on hand, so he takes out a loan to pay Jack. It’s absurd; Jack created something so valuable that even the head of the family doesn't have the funds to cover it. It feels a lot like the way a government operates. They want something, so they take on debt to get it. It’s a good thing there’s always an external source of funding. 🙂.
In my example, you can see how a problem arises within a household if someone produces goods but there isn't enough money to pay for them. If the head of the family had made a bunch of willow brooms, she could have settled the transaction through simple bartering. That is, provided little Jack actually needed those brooms. But he could also sell them on the open market and earn cash. Again, it works out because we have an external market.
Bit by bit, it becomes clear that this logic applies to the state as well. But where do we go from here? Is Switzerland the source of money, or maybe the USA (the current situation)? All over the world, billions of people work and want money for their labor. Where does all that money come from for everyone?
The answer is: money is printed in a printing press. One problem is, what if that printing press isn't located in our own country? So, where is it?
I'll leave the printing press aside for a moment and think: why do we need to print money? According to my theory, there can be no increase in wealth (daily newly created value) without printing money (more technically, increasing the money supply). And look, my theory assumes the state *should* be the one printing the money. But how much? Well, according to my theory, if the state prints exactly as much as the newly created value, then the value of the currency won't drop. So, after this long-winded explanation, we arrive at a financial equation that saves all countries with industrious populations from bankruptcy.
The state cannot simply distribute the printed money, yet theoretically, it holds all our newly created value in its hands (in the form of freshly printed bills). The state needs to inject that money into the monetary system. This is where I hit a bit of a snag, because money is a medium for exchanging value, and you can't just inject it unilaterally. I'd love for the experts to help me finish this thought.
But why does all this money actually need to be pumped back into circulation? It’s because every time new value is created, it sucks the liquidity right out of the system, which triggers a crisis. Just the other day, someone mentioned that the 1929 crash in the States was caused by overproduction. That fits my theory perfectly. If you produce an endless amount of goods and try to sell them at previous price points, you can basically break the entire financial system. The system just runs out of cash. Even if those products are genuinely valuable.
That’s exactly what's happening—the financial system is collapsing. Some people might argue it’s actually for the best, but I’d say that’s like a group of idiots claiming they’re doing great while they're falling from the 50th floor past the 3rd. You could say the same thing while passing the 2nd or 1st floor, but they’re definitely going to need to replace the tiles on the ground floor.
So, I think I’ve picked the right topic here. I'm no economist, obviously, but I feel like I'm on the right track to solving the economic crisis. In the past, I believe leaders solved economic crises in the simplest ways possible. Plenty of historical events back this up—war campaigns were often used to refill the national treasury and inject new capital back into the financial system. We see a modern example too—Somalia. They bring new value into their financial system through ransoms paid for ships.
Basically, I need a Solomon to cut through this Gordian knot of finance.
The solution has to be fast, because once we enter Europe and the Eurozone, things are only going to get way more complicated.
I'd ask that people don't respond based on credentials, just use actual arguments.