Tag Archives: Money

Of money and morals

BOOK REVIEW

You Are Under Arrest For Masterminding the Egyptian Revolution: A Memoir, Authors: Alex Mayyasi and Ahmed Salah.
Debt: The First 5,000 Years
, Author: David Graeber.
Your Money or Your Life: Economy and Religion in the Middle Ages, Author: Jacques Le Goff.
A History of Interest Rates, Authors: Sydney Homer and Richard Sylla.
The Idea of Usury, Author: Benjamin Nelson.
Summa Theologica, Author: Thomas Aquinas.
Politics, Author: Aristotle.

By Alex Myyasi – Hundreds of years ago, when modern finance arose in Europe, moneylenders moderated their behavior in response to debates among the clergy about how to apply the Bible’s teachings to an increasingly complex economy.

Lending money has long been regarded as a moral matter. So just when and how did most bankers stop seeing their work in moral terms?

In the early 1200s, the Church’s position was that extracting a single cent of interest was evil. The roots of this revulsion run deep, and across cultures. Vedic law in Ancient India condemned usury, and rulers routinely capped interest rates from Ancient Mesopotamia to Ancient Greece. In Politics, Aristotle described usury as ‘the birth of money from money’, and claimed it was unnatural because money was sterile and should not ‘breed’.

Judeo-Christian religions cemented the usury taboo.

Throughout early Medieval Europe, the local church or a wealthy family was often the only source of capital, especially outside the major commercial centers. Many peasants bought their land by getting mortgages from a monastery. In a world without credit markets and insurance, then, charging interest felt like extorting a friend or family member.

Meanwhile, the Catholic Church played its own part in sowing the seeds of a change of attitude. In the 13th century, it introduced the concept of Purgatory – a place that had no basis in scripture but did offer some reassurance to anyone committing the sin of usury each day.

Eventually kings, politicians, and business people embraced usury wholesale, and the Church looked the other way. more> https://goo.gl/LztiKA

Why Fiat Money Manipulation Can Never Produce Prosperity

BOOK REVIEW

The Scandal of Money, Author: George Gilder.

By Nathan Lewis – This system of money and prices is the information network that allows millions and even billions of people to cooperate together productively, and even, over time, with increasing productivity.

This information system is predicated on the idea that money is stable in value; that, for example, a rise in the nominal price of copper or Florida condos represents the supply-demand conditions of copper or condos, and thus contains information relevant to copper or condos, such as build more copper mines or build less condos.

By distorting the money – changing its value – the information contained in prices, interest rates, or profit and loss become distorted. It is often possible to distort interest rates at the same time, an important market price.

With a little thought, it is easy to see that you cannot improve the productivity of the system by distorting the information system that allows it to function. However, you can attempt to create fleeting short-term effects that might seem beneficial. Investments are made that, in the absence of monetary distortion, would not be made; people are hired that would not otherwise be hired.

An artificial boom may result, often followed by a real bust. The result of this “malinvestment” is typically waste: too many copper mines or condos, and perhaps not enough of something else, which became artificially unprofitable due to the monetary distortion. more> https://goo.gl/Nr5CWf

How to Manage $2 Trillion If You’re New at It

By Barry Ritholtz – Before the Saudis start putting that enormous pile of money to work, they may want to take a moment to consider a few items related to costs and performance of the new fund. Given the size of that portfolio, likely to be the world’s largest, a few basis points lost here or there may not seem like something to be too concerned about.

But those small crumbs might add up over time to many billions of dollars.

All of the academic data overwhelmingly demonstrates that costs are the single biggest drag on returns. They are also the item over which investors have the greatest control. It is tempting to ignore them. That would be a huge mistake. It is precisely why watching costs very closely from the very beginning is so important.

Look at how Vanguard Group manages its own operations for a good example of what to do.

The financial industry has spent decades creating complexity in investment products, but this serves a purpose of little relevance to a giant sovereign fund. Simple, transparent and low cost are what will serve this fund the best.

It will be interesting to see if this huge new fund can avoid many of the errors that seem to trip up existing pensions and endowments. Based on its opening gambit — the Uber investment — I have some doubts. more> http://goo.gl/YpzJOz

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Helicopter Money: A Disguise For debt Financing Funded By Short-Term Borrowing

By John Kay – No one really envisages that money would be dropped from a helicopter.

What they have in mind is that in a recession government would increase expenditure in a manner that would directly stimulate private sector spending.

The ideal format in which to undertake the borrowing required is bank notes, which pay no interest and need never be repaid. That is why the idea of dropping currency from a helicopter has appeal.

Proponents of helicopter money seem to think government borrowing undertaken in this way does not really count — whether because it is irredeemable, and not really anyone’s liability; or because it is channelled through the central bank.

The so-called Maastricht figure for EU government indebtedness, collated by the European Commission, does not consolidate the balance sheets of the zone’s central banks.

The mystery of all this arises from the belief that central banks can never be insolvent because they can always print money and that bank notes are not exchangeable for anything but another bank note. more> https://goo.gl/g3aKj0

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Barter Thinking In A Money Economy: Part 5

Part 1, Part 2, Part 3 and Part 4.

By Derryl Hermanutz – Reserves are banking system money that funds interbank payments. Reserves are not part of the economy’s money supply. Bank deposits comprise almost all of the economy’s spendable, earnable, savable money supply.

This is how commercial banks operate the central bank anchored money payments system. This marvelous globally connected system makes our rich modern life in the global economy possible.

Without payments instantly moving from global buyers to global sellers, shipments of goods would not be sent from global producers to global consumers. Producers do not ship real economic goods unless they are sure the buyers can “pay for them”.

The global banking system administers all of the “payments”. more> http://goo.gl/xvr3uH

Britain is heading for another 2008 crash: here’s why

By David Graeber – Why does anybody have to be in debt?

Why can’t everybody just balance their budgets?

Governments, households, corporations … Everyone lives within their means and nobody ends up owing anything. Why can’t we just do that?

Well there’s an answer to that too: then there wouldn’t be any money. This is another thing everybody knows but no one really wants to talk about.

Money is debt. Banknotes are just so many circulating IOUs.

If you don’t believe me, look at any banknote in your pocket. It says: “I promise to pay the bearer on demand the sum of five pounds.” See? It’s an IOU. more> http://tinyurl.com/njzcd9b

What is money?

By Brett Scott – Money is not a store of value. It is a claim on value.

Of course, it’s a bit more complex than that, because that act of altering the number of claims in the system can induce all manner of economic activity.

This is what we sometimes call ‘monetary policy.’ Creating new money claims via credit systems is a means of activating and steering real economic activity producing real value.

And the key players in that are not just central banks, but the entire commercial banking sector. Because really, it’s not like most money claims take the form of physical notes any more.

Most are data entries, binary code imprints on hard drives of computers within data centres controlled by commercial banks.

The act of creating and moving monetary claims around in such a system is the act of editing databases. more> http://tinyurl.com/pwmhlft

Can a Bitcoin-style virtual currency solve the Greek financial crisis?

By Paul Mason – Let’s recap the problem. The Greek debt is unpayable; the austerity required to pay it down is socially unbearable.

One of the key arguments of anti-establishment economists like Yanis Varoufakis: that states – not markets – create money.

Money only has value, say these economists, because states decree it. Furthermore, the state is not just standing above the market, regulating the currency: the act of taxing and spending is what creates money, not the act of buying and selling in a marketplace. It’s called “modern monetary theory,” but it’s no mere theory. more> http://tinyurl.com/qjrrsmy

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Understanding Money To Understand The Eurozone Crisis

BOOK REVIEW

The Nature of Money, Author: Geoffrey Ingham.

By Miguel Otero-Iglesias – The first theory considers that money emerges from the prehistoric wergild institutions. By establishing a value scale of the debts that offenders owed to their communities and their ancestors, the leaders of ancient tribes created the unit of account. Thus, money has its origin in law.

The second theory claims that money appears around the third millennium BC in the command economies of ancient Mesopotamia and Egypt, where the political and religious authorities introduced clay tablets to record agricultural production and taxation and its redistribution. Here, money is closely related to administrative control and taxation. more> http://tinyurl.com/mgyanc2

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A Revolution in Money

By Andrew Ross Sorkin – Imagine it’s 2040.

When you walked into the store, a sensor identified you, perhaps from a ring or watch you were wearing that transmitted the information. Or perhaps you didn’t need to wear anything special. Maybe a device in the store figured out who you were using a combination of facial recognition, 3-D body shape identification and your gait.

If the last three decades revolutionized the information and telecommunications industries, the next three may upend the basic tenets of finance: currency, credit and banks, as well as payment and transmission systems. more> http://tinyurl.com/podmvnz

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