What is money?
Majority think they know what money is, but after reading this, they understand they were wrong. Essential reading (including the links). Via Golem XIV.
There is a particular scene in the film “It’s a wonderful life” in which the hero of the story is trying to prevent a run on the Bailey Savings and Loan. In an effort to calm the anxious savers wanting to withdraw their money George Bailey cries out “you’ve got it all wrong, the money’s not here, well your money’s in Joe’s house, that’s right next to yours, and the Kennedy house and Mrs Maitland’s house and a hundred others”.
As films go it is a genuine classic. But unfortunately it has perhaps unwittingly perpetuated a whopping misrepresentation of how banks actually work; a little white lie that the IMF have recently just driven a sledgehammer right through.
Their working paper, titled “The Chicago Plan revisited”, seems to have slipped under the mainstream media attention (and most of ours!) during the summer lull. That is until Ambrose Evans-Pritchard of the Telegraph picked it up a few weeks ago. At the core of the IMF paper is a deep seated analysis of how banks actually function in the economy and their role in the money supply. It is nothing short of revolutionary in that the paper gives full acknowledgement of, and support for, an intellectual movement that has doggedly criticised the very nature of money. Criticism that has so far been completely ignored and dismissed by mainstream economics.
We all think we know what money is (although reality gets a bit complicated when we start to lift the lid) but the more contentious issue is “where does money come from?”. How is the supply of money controlled? We know that the supply can go up and down over time, but who indeed has the power to expand or contract the money supply; the power of monetary creation and destruction?
But before we get into this we first need to clarify our terms. What is money?
Full read here.
A few links worth checking out,