[p2p-research] Fwd: Where does the "lost" money go ? can we find it and get it back ?

Tue Jan 6 10:39:16 CET 2009

cheers marc..

check out http://transitionus.ning.com/ - the US branch of a global
grass roots peak oil / climate change transition movement exploding in
the US, AUs, UK right now ---- just about exploding as a mainstream
process,.,. inspired by Permaculture education in the UK

I wonder if Peak Debt could be folded into the Transition Towns
*local, state, national" movements ? but what would the Peak Debt
movement say ? how do we reform money ....

local currencies ? what else ?

dont we need to also challenge and dismantle such systems as the Fed,
corporate finance, finance capitalism, financialisation etc etc

or is simply creating a transition movement to an alternative system enough ?

as michel says, this is researchable

On 1/6/09, marc fawzi <marc.fawzi at gmail.com> wrote:
> <<
> IF the socioeconomic system were also
> revised/reformed/evolved to be more equitable.  Right now, that AIN'T
> going to happen.
>>>
>
> Stan: I was waiting for someone to say this.
>
> It ain't if we continue to look at the state as some kind of parent or sheep
> herder
>
> But it can happen if we get our head out of our ass and start taking
> responsibility for our existence.
>
>
>
>
> On Tue, Jan 6, 2009 at 12:04 AM, Stan Rhodes <stanleyrhodes at gmail.com>wrote:
>
>> Kevin, added you in case something I said needs to be slapped around a
>> bit.
>>
>> There are three concepts here.  One is "asset value," one is the
>> creation of money via "credit" (aka the "monetization of debt"), and
>> the last one is "inflation."
>>
>> The "money" doesn't go anywhere if there is something valued (an
>> asset) that drops in value.  You've probably heard the term "toxic
>> asset."  A "toxic asset" is just something that's not worth the price
>> tag people have put on it.
>>
>> Consider a gemstone you think is a diamond, and you think is worth
>> 1000 USD.  You go to sell it, and the prospective buyer has it
>> appraised.  The appraiser tells you both it's just glass.  The
>> asset--the glass you thought was diamond--is essentially worthless,
>> and has negligable value.  No one "wins" that "lost" value.
>>
>> Stocks and various financial instruments--assets--that are held for
>> their monetary value can lose their value too, but no one "gets" that
>> drop in value as money.  It's a question of who holds the hot
>> potato(es) when the value plummets, and in this case it was a
>> significant portion of the financial sector.  In a bubble, those
>> making a lot of money from the bubble also stand to lose their ass in
>> it as well, and often do.  Most simply have no idea when the bubble
>> will pop, and they're getting GREAT returns in the meantime...
>>
>> The estimated value of the mortgages came from the estimated value of
>> the homes, and that value had been increasing constantly, beyond
>> anything reasonable, creating a bubble.  A bubble is when assets are
>> valued much more than they're actually worth.  Not many people care
>> that the overvalued assets are overvalued during the bubble, because
>> everyone's buying and selling and the value is growing.  Eventually
>> this inflated sense of value "pops" when people realize the assets are
>> not worth as much as they are priced.  That's the asset portion of the
>> mess, in simple terms.
>>
>> In case Thomas' reply about credit and monetization wasn't understood,
>> I'll explain that briefly too. "Monetizing debt" means the government
>> borrows money from the Fed and spends it as money.  Essentially, the
>> government is credited Federal Reserve Notes (USDs), with the promise
>> to repay that debt to the Fed Reserve in the future.  The government
>> then puts this money into circulation by spending it.
>>
>> The concept of money created from credit is simple enough in concept.
>> Think of 3 people on an island that use IOUs with each other.  One
>> harvests coconuts, another fishes, and another makes sandals.  Let's
>> assume they value fishes and coconuts the same, but sandals are worth
>> about 10 fishes or coconuts.  We can see how credit (IOUs which are
>> money) flows:
>> 1. The coconut gal needs sandals, so she "buys" a pair from the sandal
>> guy by writing him a 10-coconut IOU.
>> 2. The sandal guy needs some fish, so he gives the fish dude the IOU
>> for 10 coconuts in exchange for 10 fish.
>> 3. Later that day, the fish dude brings the IOU to the coconut gal and
>> gets 10 coconuts.  The gal destroys the IOU.
>> The cycle of credit has come full-circle.
>>
>> Our government essentially tells the Fed Reserve "IOU 10 USDs," the
>> Fed Reserve says "ok, I'll put those in your account, but you owe me"
>> and the government then spends those USDs on programs or bailouts or
>> whatever.  At some point, those USDs are supposed to be paid back to
>> the Fed Reserve.  That's why those USDs are also called Federal
>> Reserve Notes--they're IOUs to the Fed Reserve.
>>
>> In theory this is useful, because our government, like the coconut
>> gal, could get the sandals when she needed them and then pay back
>> later.  In other words, the government could get a wad of cash when it
>> needed it and pay that wad of cash back later (via collected taxes,
>> for example).  This is what banks do when they give someone (person,
>> business, another bank) credit.
>>
>> You may be asking "why do we need the Fed Reserve to create money and
>> lend it to us?"  Good question, but that's another very long
>> discussion, one that I think begins with "In theory, we really don't
>> need them to, because we could do it ourselves..."
>>
>> Lastly, INFLATION.  Monetary inflation, as Thomas said, is pumping
>> more money into the economy, diluting the money supply.  It's
>> "dilution" because the same "value" in the economy is spread over more
>> money, meaning each money unit is worth less value than it was--it's
>> diluted.  Gum was a penny, now 50 pennies.  The gum, itself, is still
>> just gum, but a penny is worth less than it was.
>>
>> Take the islanders again.  There is no need to destroy the IOUs when
>> they come back to the issuer, since they'd just need to write one
>> again.  They become "monetized debt."  These dollars go into
>> circulation and occasionally one of them writes additional dollars
>> when they wear out.  There are only 3 people, so it's pretty easy for
>> the islanders to keep an eye on one another, and each knows the other
>> is good for it.
>>
>> Let's say they make an "official" unit: the former IOU 10 becomes 10
>> "island dollars."  The IOUs are no longer connected to a particular
>> person, they are just an exchangeable note. They also make these
>> dollars legal tender: all 3 agree it MUST be accepted for all debts,
>> public and private, just like our Federal Reserve Notes.  Although a
>> dollar was originally valued as roughly one coconut or one fish or .1
>> of a pair of sandals, supply and demand causes fluctuations in price.
>> That's fine, and expected.
>>
>> Over time, more people wash ashore and begin exchanging their goods
>> and services, until there are 10 islanders, all using the established
>> money system.  One of them--we'll call her the rancher--wants to clear
>> a section of land and build a ranch for the island's native flightless
>> birds, so she can produce and sell more eggs.  To finance this, she
>> creates 10000 dollars, and figures that, once she's built her ranch,
>> she'll just destroy 100 dollars that come to her per week.
>> Essentially, she is acting as a bank, and loaning to herself by
>> monetizing debt.
>>
>> The island hasn't run into this situation before, but it's "legal,"
>> and the rancher has good intentions.  She wants to create something of
>> value to her, and likely the community.  This new development seems
>> reasonable enough to everyone.
>>
>> The rancher spends this 10000 dollars on supplies and labor.  The
>> others are just a little uncertain that she'll be able to provide
>> enough goods and services to "repay" in "good time."  They're not sure
>> she sees how much those 10000 dollars are worth to everyone.  As she
>> spends more money, and it enters into circulation, the islanders see
>> more money in everyone's hands.  Those working on her land ask for
>> higher wages than they earn on their own, both because they know she
>> needs the help, and because they feel they should be compensated more
>> for spending their leisure time working.  Other islanders see this
>> increase in the money supply, and realize they could ask a little more
>> for their good and services, and get it.  These factors combine to
>> nudge the islanders to increase their prices.
>>
>> Thus, the islanders see the value of their dollars decrease as prices
>> increase, and marvel at inflation.  Sandals now sell for 20 dollars,
>> coconuts for 3 dollars (they cleared coconut trees for the ranch, so
>> coconuts are more scarce), and fish for 2 dollars.  "Why, back in the
>> old days," the original 3 islanders complain, "a fish only cost a
>> dollar!"
>>
>>
>> I hope these explanations begin to reveal some of the mechanics behind
>> the issues discussed.  I don't know how far the email goes back.
>> However, I think anyone discussing money and economics should also go
>> through the effort of reading some of the material online, including
>> some of the material, like E.C. Riegel's work (Thomas makes this
>> available online because he's awesome), and some basic Austrian,
>> Chicago, etc school perspectives (use wikipedia at least), and so on.
>> Just because many people are confused about what things are and why
>> they happen doesn't mean that no one knows, or that the whole thing is
>> a weird scheme (well, ok, the Federal Reserve is a weird scheme).
>>
>> Also, Michel, think about it backwards, or maybe inside-out.  Credit
>> is (in theory) a measure of your "worth" in demanded value.  This is
>> why Chris Cook talks about guarantee societies and credit as a
>> relationship.  If the rancher took the loan from an actual bank, but
>> couldn't pay it back, the bank would lower the measure of her "worth"
>> in public-demanded value (goods and services the public wants).  In
>> other words, if you take more than you can pay back, you will be
>> allowed less credit, or perhaps none at all.  The "loss" is then
>> written off, and you can think of it as the "cost" of the system
>> learning and revising your credit worth within the "flow" of money.
>> In a fair system, the overall burden of the lesson is borne by
>> everyone, and perhaps a little more by those responsible for
>> monitoring credit ratings.  In an unfair system, well... take a look
>> around!
>>
>> Essentially, the current problem is, not only is the monetary system
>> out of the public's control, it failed to judge actual value worth a
>> damn.  The solution presented is to monetize a bunch of debt--print
>> money.  Yes, that will lead to monetary inflation, but that might not
>> actually be such a big deal IF the socioeconomic system were also
>> revised/reformed/evolved to be more equitable.  Right now, that AIN'T
>> going to happen.
>>
>> Many battles I've seen between Austrian (take your pick on Mises.org)
>> and Keynesian (people might recognize the name Paul Krugman) seems to
>> often be fought over, around, in, or through, inflation.  The debates
>> touch on the rest of the system, but so often come back to one side or
>> the other's perspective on inflation.  In actuality, inflation just
>> is, it's socioeconomic equity that really matters.
>>
>> -- Stan
>>
>> On Mon, Jan 5, 2009 at 1:34 AM, Michel Bauwens <michelsub2004 at gmail.com>
>> wrote:
>> > Hi Thomas,
>> >
>> > but your answer then leaves the question: where is the money gone that
>> has
>> > been wiped out as value from the stock market and housing prices?
>> >
>> > since in your account it is not lost, where is it and who has it?
>> >
>> > I find your answer to be very counter-intuitive and the opposite of what
>> I
>> > would assume.
>> >
>> > If you cannot repay it, it's lost, but if you repay it, it is again
>> > available for further loans and as basis for fractional reserve, and
>> > therefore, in my view, not destroyed.
>> >
>> > Michel
>> >
>> > On Mon, Jan 5, 2009 at 10:21 AM, Thomas Greco -- thg <thg at mindspring.com
>> >
>> > wrote:
>> >>
>> >> Money is created when banks make a loan; it is destroyed when the loan
>> is
>> >> repaid.
>> >>
>> >> The bailout will be inflationary because the debts that are being
>> shifted
>> >> from the private sector to the public sector are debts that cannot be
>> paid
>> >> by the original debtors. Government will take the loss, not by using
>> >> tax
>> >> revenues to repay them but by monetizing more government debt. That
>> >> will
>> >> dilute the value of all the money already in circulation.
>> >>
>> >> Tom
>> >>
>> >> ----- Original Message -----
>> >> From: Michel Bauwens
>> >> To: Nicholas Roberts
>> >> Cc: Thomas Greco -- thg ; Peer-To-Peer Research List
>> >> Sent: Sunday, January 04, 2009 10:55 AM
>> >> Subject: Re: [p2p-research] Fwd: Where does the "lost" money go ? can
>> >> we
>> >> find it and get it back ?
>> >> Hi Nicholas,
>> >>
>> >> Does the money have to 'go' anywhere ...
>> >>
>> >> Since it is created 'out of nothing' through fractional reserve
>> >> banking,
>> >> why can't it be destroyed just as easily, in the equivalent of a
>> >> virtual
>> >> fire?
>> >>
>> >> I understand from some remarks, 'the bailout won't create inflation
>> >> because it's merely trying to replace lost money', that this money was
>> >> effectively destroyed.
>> >>
>> >> Perhaps monetary transformation expert Thomas Greco has some insight to
>> >> your question?
>> >>
>> >> see also http://p2pfoundation.net/Category:Money
>> >>
>> >> Michel
>> >>
>> >> On Sun, Jan 4, 2009 at 12:05 AM, Nicholas Roberts
>> >> <nicholas at themediasociety.org> wrote:
>> >>>
>> >>> --
>> >>> Nicholas Roberts
>> >>> [im] skype:niccolor
>> >>>
>> >>>
>> >>>
>> >>> ---------- Forwarded message ----------
>> >>> From: <nicholas at themediasociety.org>
>> >>> Date: Sat, Jan 3, 2009 at 5:16 PM
>> >>> Subject: Re: Where does the "lost" money go ? can we find it and get
>> >>> it
>> >>> back ?
>> >>> To: Dean Baker <dean.baker1 at verizon.net>
>> >>> Cc: Noam Chomsky <chomsky at mit.edu>
>> >>>
>> >>>
>> >>> happy new year Dean
>> >>>
>> >>> who takes it out of circulation ? how ?
>> >>>
>> >>> is it destroyed ? made null ?
>> >>>
>> >>> how much of the wealth from a bubble gets accumulated by the rich
>> >>> promoting the bubble ?
>> >>>
>> >>> how much gets taken out of circulation ?
>> >>>
>> >>> is there a good reference to this ? a website or book ? I am
>> >>> interested in the formal process and also the reality...
>> >>>
>> >>> thanks in advance
>> >>>
>> >>> -N
>> >>>
>> >>> On 1/3/09, Dean Baker <dean.baker1 at verizon.net> wrote:
>> >>> > Hi Nicholas,
>> >>> >
>> >>> > It's just like counterfeit money that has been seized by police. It
>> is
>> >>> > wealth that is taken out of circulation. It means in principle that
>> the
>> >>> > people who did not own stock and did not lose wealth can be better
>> off,
>> >>> > assuming that the demand generated by this stock wealth (people
>> >>> > spend
>> >>> > in
>> >>> > part based on the wealth they hold in stocks) is replaced by other
>> >>> > sources.
>> >>> >
>> >>> > regards,
>> >>> >
>> >>> > dean
>> >>> >
>> >>> > Nicholas Roberts wrote:
>> >>> >> hi Dean
>> >>> >>
>> >>> >> this is a really obvious question, but I have yet to find a good
>> >>> >> answer;
>> >>> >>
>> >>> >> where does the money "lost" in the stock and housing bubbles go ?
>> >>> >>
>> >>> >>
>> >>> >> is it destroyed ? how and where ?
>> >>> >>
>> >>> >> is it transferred ? how and where ?
>> >>> >>
>> >>> >> is it accumulated ? by whom, how, where  ?
>> >>> >>
>> >>> >> can we get it back ?
>> >>> >>
>> >>> >>
>> >>> >> are there any good flow diagrams that explain this in plain terms
>> for
>> >>> >> regular folks...
>> >>> >>
>>
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>

-- 
-- 
Nicholas Roberts
[im] skype:niccolor