h2g2 The Hitchhiker's Guide to the Galaxy: Earth Edition

I take my answers from Berkeley who wrote on money (and other social things) with extraordinary clarity in the 1730s. I'm sure it's available online . . . yes, http://socserv2.socsci.mcmaster.ca/~econ/ugcm/3ll3/berkeley/querist

Yes, we're often short of answers.

what he says

I think he wrote wisely but while there was still a link between money in circulation and gold. Nowadays there is something like 80 times more money in circulation than there are things to buy with it.

A bank has to have 10% liquidity so instead of saying "for every £100 we have deposited we will hand over £90 in loans" they can say "We have £100 deposited. Let's keep that as our liquidity and create £900 in credit!"

There is nothing anywhere apart from the small amount of liquidity to support the credit (and the promise that one day someone will pay it back).

i don't really understand but i am in primary so how could i

Sorry Rockcheeky, but that was for recumbantman. I didn't expect you to understand - but I did say that this was one of the harder threads to follow.

Berkeley was one of the first (I think) to say that the value of money had nothing to do with any quantity of gold supposedly kept in a vault. He said the value of money depended entirely on the opinions of people, and on the work that it stimulated.

He asked whether the wealth of Holland depended on the industriousness of the Dutch, and whether an infux of gold into a country might be actually ruinous, if it stopped people working -- citing the example of Spain and its New World spoils.

influx

If you look at the international money markets more than 90% (and it could be as high as 99%) of money in transactions is for buying and selling money. The graph is quite astonishing if you go from the 1970's - when the vast amount of exchange was for the buying and selling of goods between countries - to the present. I was at a conference with Prof Bernard Lietaer when he brought it to our attention. This creates no benefit to anyone other than the people who make money out of the transactions. Nothing is created of value to anyone.

In the UK (and lots of other places) the Government has to borrow money from banks to put it into circulation. This then has to be repaid with interest. Why don't Governments make the money themselves?

We did for a very short period of time immediately after the first world war when a special currency was issued with no interest attached to pay for the fleet. They were then able to tax the money back in over a period of time without costing the taxpayer extra for interest payments.

Now that is fascinating. Is it heading for a bubbleburst?

Lietaer thinks it is. And to be honest some electrical engineers looked at the graph and said it resembles the sound graph as it goes into feedback when the speakers scream.

Lietaer is a believer in having different currencies at different levels of transaction, so that each one is used in its own realm to perform what it is best at - so there should be an international currency for international transactions (The Euro) and a local currency for local transactions. This covers things like babysitting, mutual favour type transactions and buying local produce - not the pound or the dollar.

Once you get to the local currency level things become very interesting as each unit of currency is backed by something much more tangible - like a home baked cake or an hour of someone's labour.

Hi Chimp. What do you think is the best thing to do for someone else?

Please sir please sir please sir - can I answer? Understand them.

*Pats Recumbentman on the head and gives him a toffee*
Very good answer. Right up there with love them!

mmm toffee

My Name is Vipin Arora.
And thought of the week is: All men (and women) and equal; opportunities divide them.

Who's in charge of opportunities?

"How can one learn the truth by thinking? As one learns to see a face better if one draws it."

--Wittgenstein, 'Zettel' #255

I like that. I'll try and remember it.