Hi Dan, Once again a very insightful explainer video. Speficially, for the synthesis regarding 'interest and the growth imperative' about which I also have a question. You say: "...and if everyone is doing this - taking out loans and having to pay them back (including interest) - then it would seem that the total money supply would have to increase over time. However, this argument assumes that interest payments are somehow taken out of circulation by banks, which they are not." New for me is this part: "this argument assumes that interest payments are somehow taken out of circulation by banks." I'd like to know more about this argument and the usual assumption. Do you have a name/reference? Thanks and keep up the good work!
Regarding the possibility of Sovereign money, surely we are already half way there in that every time the Gov't spends it creates new money, eg it tells the BoE to pay the NHS £1bn, this is effectively created on overdraft anew, it's not spent out of tax money. The gov't then balances its books by deducting any tax it got in today and "borrows" the balance, by accepting savings from my pension fund, or by me buying more premium bonds, thus withdrawing money from circulation, but it doesn't need to do that, thus going the whole way.
Inflation has nothing to do with money supply (just as it has nothing to do with interest rates, as the recent literature on the subject tends to show, cf. the post-Keynesians), it's in reality a conflict phenomenon of the distribution of national income between workers, firms and rentiers.
This would be one option for taking back the management of the public monetary supply from private banks control. The central bank digital currency would be an electronic equivalent of cash. Whereby the central bank would control the amount of digital currency created (spent into existence on democratically decided publicly useful projects, or a UBI), and the amount removed (via taxes)... instead this same process is being largely controlled by private debt creation in the banking sector. Of course the central bank could create a digital currency and allow banks to keep creating money with private debt as well but this likely would not serve the public interest as well, and may have many caveats and conflicts of interest if they exist side by side.
ANOTHER ISSUE: At 7:55 the author writes "real wealth can only grow according to physical laws". What laws exactly are referred to as "physical laws"? I think that this reference to "physical laws" is not contextually meaningful. A more reasonable statement would be "non-financial wealth is the result of owning tangible assets". References to "physical laws" (without the specifics) is not helpful in explaining economic concepts.
After one year of watching a lot of money creation videos on yt,this one is the best in my opinion.Thanks for sharing so much knowalage with public.
Plz keep going…. Great content 😊
Hi Dan,
Once again a very insightful explainer video. Speficially, for the synthesis regarding 'interest and the growth imperative' about which I also have a question. You say: "...and if everyone is doing this - taking out loans and having to pay them back (including interest) - then it would seem that the total money supply would have to increase over time. However, this argument assumes that interest payments are somehow taken out of circulation by banks, which they are not."
New for me is this part: "this argument assumes that interest payments are somehow taken out of circulation by banks." I'd like to know more about this argument and the usual assumption. Do you have a name/reference?
Thanks and keep up the good work!
clear description of such a confusing idea for me, many thanks
Absolutely amazing! Thank you so much!!!
Very valid information.
NPV - is a growth imperative. Return on investment to pay back interest. Opportunity cost being money in the bank + interest.
Regarding the possibility of Sovereign money, surely we are already half way there in that every time the Gov't spends it creates new money, eg it tells the BoE to pay the NHS £1bn, this is effectively created on overdraft anew, it's not spent out of tax money. The gov't then balances its books by deducting any tax it got in today and "borrows" the balance, by accepting savings from my pension fund, or by me buying more premium bonds, thus withdrawing money from circulation, but it doesn't need to do that, thus going the whole way.
Why did you stop making videos? :-(
What about inflation?
Inflation has nothing to do with money supply (just as it has nothing to do with interest rates, as the recent literature on the subject tends to show, cf. the post-Keynesians), it's in reality a conflict phenomenon of the distribution of national income between workers, firms and rentiers.
If everyone paid off their debt, it would not lead to 0 dollars but rather it would lead to an increased value or the currency.
why should the central bank create a digital currency?
This would be one option for taking back the management of the public monetary supply from private banks control.
The central bank digital currency would be an electronic equivalent of cash. Whereby the central bank would control the amount of digital currency created (spent into existence on democratically decided publicly useful projects, or a UBI), and the amount removed (via taxes)... instead this same process is being largely controlled by private debt creation in the banking sector.
Of course the central bank could create a digital currency and allow banks to keep creating money with private debt as well but this likely would not serve the public interest as well, and may have many caveats and conflicts of interest if they exist side by side.
@Liam, Nah, I'll pass.
ANOTHER ISSUE: At 7:55 the author writes "real wealth can only grow according to physical laws". What laws exactly are referred to as "physical laws"? I think that this reference to "physical laws" is not contextually meaningful. A more reasonable statement would be "non-financial wealth is the result of owning tangible assets". References to "physical laws" (without the specifics) is not helpful in explaining economic concepts.
I assume that Dan refers to laws of Thermodynamics, as explained here: ua-cam.com/video/h6Clz8DQvIk/v-deo.html