The Financial System and Money Supply

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.

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👋

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.😂

How could you say I haven't helped? I really did point you toward the right resources to help you understand what you're looking for.

To put it simply, I suggest reading this:
Perišin I, Šokman A, Lovrinović I: “Monetary Policy,” Wharton School, September 2001. (450 pages)

I suppose you're hoping someone can just explain the entire monetary side of economics in a couple of sentences. That probably isn't going to happen.

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.

Hyperproduction is a total myth... Human desires are essentially limitless—honestly, who wouldn't want to consume more? So, claiming that "overproduction" is some kind of fundamental cause for a crisis? It just doesn't hold water. 😁
I mean, let’s be real: everyone is striving to produce as much as possible. What actually happens—and this is what Gregory Williams7 correctly points out—is that certain goods might be overproduced relative to actual demand. In those cases, the producer takes the hit, because they can't collect more than what they poured into the production factors in the first place. Their loss isn't caused by a "lack of cash," but rather by a massive miscalculation regarding how much people actually wanted their stuff. If I recall correctly, even Adam Smith touched on this logic. 😉

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.🙂

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.

mistystag0

Maria Thomas48 said: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.🙂

There isn't one single answer to that question. I guess the way money is issued hasn't always been the same.

Printing banknotes and minting coins is really just a tiny fraction of how the whole system works. Most money isn't even physical; it’s just digital entries sitting in bank accounts. For instance, I guess cash makes up about 25% of the money supply in the US, and globally, that percentage is probably even lower.

mistystag0

Maria Thomas48 said: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.🙂

Like I mentioned before, you might want to look up how central banks operate, specifically regarding primary and secondary money issuance. It's the central banks that actually issue the currency. They try to be very careful about determining exactly how much is released into the system, just so they can avoid triggering inflation or deflation. I guess it's all about finding that balance.

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?

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.

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.

Maria Thomas48 said: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.

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 read it on Wikipedia, but still,

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.🙂

mistystag0 said:mistystag0

There isn't one single answer to that question. I guess the way money is issued hasn't always been the same.

Printing banknotes and minting coins is really just a tiny fraction of how the whole system works. Most money isn't even physical; it’s just digital entries sitting in bank accounts. For instance, I guess cash makes up about 25% of the money supply in the US, and globally, that percentage is probably even lower.

mistystag0

Like I mentioned before, you might want to look up how central banks operate, specifically regarding primary and secondary money issuance. It's the central banks that actually issue the currency. They try to be very careful about determining exactly how much is released into the system, just so they can avoid triggering inflation or deflation. I guess it's all about finding that balance.

When will they finally realize that’s just impossible? 😁

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.

Maria Thomas48 said: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.

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.

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.

Maria Thomas48 said: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.

Forget it. You've got a point. 🤦 Let someone else take over this thread. 😬