Dla oszczedzajacych - dlaczego jestescie looserami

[Gość: deos]

Show numer 8:

www.richdad.com/RichDad/PodCast.aspx

[korkix78]

Heh fajny timing. Akurat koncze jedna z ksiazek Roberta (te
podstawowa) :)
I zastanawialem sie ktora teraz lyknac.

Dzieki za linka

[Gość: deos]

Tutaj mam dla ciebie kolejna lekturke:

What is money?

What follows is an effort to inform anyone who has asked this questions "What is
money?", "What is a pound?", "Why do interest rates affect inflation?", "What
the hell causes things to cost more each year in the first place?", "Why does
EVERYONE, normal people, the government, the NHS, seem more in debt EVERY
year?". Many people have been mentioning this recently, and I believe most
people simply do not know the answers to these questions. It is also a personal
effort to organise my thoughts in a manner that is open to critical reaction.
Take heed however, this will be quite long.


Have you ever asked yourself, while holding a slightly crumpled five pound note,
"What is money?" "How much money is there?" Well, in the UK, there are loosely 2
very distinct forms of money. One is obvious; it is is the notes and coins that
you can use to pay for goods and services, though as you may have noticed these
are used with decreasing frequency in the modern day. I find it best to refer to
this money as simply "cash".*

The second may be called "Bank Money". Bank money is the sum total of all bank
account balances. As we can all use cheques, money orders, debit and credit
cards these days to pay for goods and services as easily, more easily, than
cash, it is clear that this can also be considered money. Now comes a good
question "If I added up all the cash in the country, does it equal all the money
in the banks?". The answer is a flat NO. Not by a long, long way.**

Still, I've simply explained two forms of money and said nothing about how they
are made, which is the interesting part, of which I will try to give two
explanations, one simplified and one accurate. To the first:

Imagine, if you will, that there exists a central bank, an arm of the
government, responsible for printing cash. All other parties are legally
restricted from printing cash. Imagine too that there exists one, and only one,
private, consumer bank - just imagine that it is true for a moment. Now, if I
work for the central bank as a fireman, policeman, rescue dog, what ever, and
the central bank gives me £100 in cash as renumeration.

Now, I don't really need the money right now, and the private bank turns to me
and says "If you give me that £100 pounds, I'll give you 5% extra for every year
you leave it with me." "Jolly good", I think and give it the money. The private
bank then turns to someone else, lets call him Gordon2, and says "Do you want to
borrow this £100?, if you pay me 7% a year it's yours". "Sure" Gordon2 thinks,
"I can buy something that will make me more money than that!", and so Gordon2
takes this cash and buys a, er, house from Gordon3. This all seems very normal,
obvious even, but it's not over yet. The private bank then turns to Gordon3 and
says "If you give me that £100 pounds, I'll give you 5% extra for every year you
leave it with me." "Jolly good" thinks Gordon3, and gives it the money to the
bank, which quickly turns to Gordon4 and lends it out at 7%. Gordon4 then spends
the money on Gordon5 who then puts the money back in the bank at 5%. This,
borrowing, spending, lending cycle continues in the UK over 33 times using
figures from the Bank of England figures, I'm not making this up! The limiting
factor is generally people coming into the bank and asking for cash so they can
come out and make purchases outside of the private banking system.

Why is this bad? Because at the end of this cycle 33 people have "100 pounds in
the bank" and yet only 100 pounds of cash exists, or that only 3% of money is
cash. As everyone uses credit, debit cards and cheques, clearly they can still
use this extra £3200 exactly as if it was cash. This causes two problems
immediately. [1] If 33 people have 100 pounds, where only one did before, surely
each pound of money is worth roughly 33 times less than before this system
began? This is the root cause of inflation, the fact that the amount of "money"
increases at a current rate of about 12% every year means, surprise surprise,
goods cost roughly this same amount more each year, as money becomes
increasingly worth-less. Who here really believes inflation isn't running at
much closer to this value than the 2.1% CPI the government clings too? A
reasonable measure of inflation may simply be money supply growth minus nominal
GDP growth, but I digress.

[2] What happens when more than 3% of people go into the bank and ask for "their
cash" back? As you can clearly see the, if this happens there is
not_enough_cash. That means if today a mere 3% of people in the country went and
asked for their cash, the whole banking system collapses! Clearly this is one of
the most unstable systems ever created, where the entire stability of the nation
rests on the whims of ANY 3% of the wealth! Moreover, even if only 1% or 2% of
people ask for "their cash" over the usual just to hold onto it, the bank has to
call in 33% or 66% of its ENTIRE loan portfolio to maintain the same operating
conditions. That's why banks are not loaning out any more money right now,
because there is an increase in people simply going in and "asking for their
cash", corporate and private, so banks now have to call in more loans and
certainly aren't interested in making them.

I promised a second, accurate explanation of the system, and here it is. Start
again with a central bank but this time with any number of private banks. Again,
I am given £100 pounds cash for my services to the government as a fireploddog.
I give that to any private bank, in exchange for this promise of 5% extra a
year. The bank then holds onto this cash, and 32 people come in and ask to
borrow £100 pounds. The bank says "sure, why not" and credits each of their
accounts with £100 it_does_not_have at interest. As they know such a small
percentage of people (3%) go in and actually ask for their money in cash, they
can lend out 1/0.03 times the amount they actually have, and in the process
"create" £3200 pounds of money, weakening the buying power of the original guy
who put the money in the bank (me).

This is, in all ways, a tax, the tax you never knew you paid. it's decreasing
the value of money you earned, in a way that you have no say over. It's a tax
where almost all of the proceeds go to private banks and you are never told why.
If this rouses any interest, in part II I will go more into detail on the
effects of interest rates, the deflation or hyper-inflation debate, and the
exponentially growing nature of this system in a finite world, and in part III,
the solutions.

*I neglected to mention the money that private banks are obliged to hold in
accounts at the Bank Of England may also be considered in this first kind of
money. This complication is not essential for the understanding of the
situation. The correct terms for this first kind of money are, in any case, "M0
money" or "Narrow money".

**"Bank money" is not the technical term; this money's name is "M4 money" or
"Broad Money". As of November 2007, there is currently 33 times more bank money
than exists as cash.

***I'll spell and grammar check later, for now I deserve a cookie.

II

[Gość: deos]

As promised, here is part II of my attempt at analysing modern banking. This is
considerably more simple, but if I don't cover this I can't draw good conclusions.

First, a subtlety I missed as far as a "run on the bank" goes.

Once a private bank has loaned out £100 to these extra 32 people, it then "owns"
£3200 pounds of debt - though it also liable to requests of £3300. Now, if more
than 3% of a troubled bank's customers request "their cash", if there are still
multiple banks, the system won't collapse. This is because it can either sell
these £3200 pounds of debt-assets to other private banks, in return for cash, or
it can use these debt-assets as collateral to borrow money from other banks,
which will be requested in the form of cash. As a good example, more than 3% of
customers of Nork went to ask for their cash at once and the financial system
didn't collapse; simply as it wasn't more than 3% of customers to all English
banks.* However, that the wealth of the entire population of the UK rests on
"any 3%" of the wealth of the entire population remains valid.

Now that that is cleared up, let's move on to interest rates. Everyone has heard
that increased interest rates are supposed to "reign in" inflation, and lowered
ones "encourage growth". The reason is exactly what you may imagine - with
higher interest rates, less people want to borrow, and with lower interest rates
more. Let's take this though, in light of part I.

As I described, when someone, say "the mighty Goldon",** borrows from the bank
they are actually creating "money" (though not cash), presumably to spend it.
This will both directly increase (nominal) Gross Domestic Product by the
spending and produce inflation which detracts slightly to the value of all other
money. More people will do this when interest rates are low and there is more
incentive to borrow money as the repayment is lower, hence the more the increase
in GDP (nom).

One could very easily ask "But doesn't the increase in inflation mean that real
GDP doesn't change?", and that may well be true, but when the government's
inflation data is faked to be too low, it is difficult to say.*** In short, with
the artificially low inflation data that the government produces, the expansion
of the money supply by this borrowing of money looks like it increases GDP,
nominal and "real", and hence growth. I said the limiting factor of how much
"bank money" banks can create from a £100 in cash is related to the number of
people who come in and ask for their cash at any one time, and while this is
certainly a hard limit, a further limit is simply how many people come into the
bank and ask to borrow money. When interest rates are decrease the demand for
loans increases beyond the banks ability to lend and still maintain enough cash
to fund people coming in to ask it, the bank has a problem. This is simply
solved by encouraging people to not come into the bank and ask for their money -
remember cash machine charges? These weren't to make money directly from people
asking people for their cash, they were to discourage people from asking for
their cash in the first place. Remember all those adverts to use "x"'s credit
cards and debit cards? These were as much about encouraging existing customers
to use this "safer" alternative as they were to encourage people to switch to
"x". With less usage of cash, and more usage of cards, the banks can loan more
money and expand the money supply further causing inflation.

So, low interest rates can be seen generally good for the government concerned
with growth. Why bother raising interest rates at all then? Because, not
surprisingly, people don't like inflation, they don't like the value of what
they hold diminishing each year, and the government eventually has to deal with
every extra pound of money supply that banks create meaning there is an extra
pound of debt to be paid. This increase in interest rates causes more saving and
less loans, which will tend to contract the money supply as people pay off their
debts and thus cause deflation (or rather, less inflation).

An important part of this system I have yet to mention is its eventual and
inescapable doom *evil laugh*:

Imagine a third scenario, in this scenario there is no government owned central
bank, but there is any number of private banks, who's "money" is legal tender.
The situation can be imagined as similar to today in Britain, but that dealing
in cash is declared illegal, and so cash does not exist - feasible at least. In
this situation, ALL money represents debt, for money to exist it must be
borrowed from the bank. So, say Goldon is the first person in this system, and
borrows £100 at 7% interest a year. The next year, he owes £107. Where does this
£7 come from? There's only £100 in the world right now, and so the only way to
pay this extra £7at the end of this year is to borrow more money. This means
Goldon has to recklessly expand his enterprises every year, every day even,
because what he owns has to be larger and larger so that he can borrow more
money on new collateral to pay off the interest from the first moment money is
created. If he ever stops expanding, if he say "there is nothing else to get",
and lays down, then he must declare myself bankrupt and give everything to the
bank. From the initial vipers kiss of borrowing, he is overrun with venom,
coursing through his economic veins until there is nothing but to fall defeated.****

Now, take a system where 97% of all money is debt based, such as the UK, and you
can see that (apparently) the only way out of debt that the above system doesn't
have is to swamp the country in paper cash, which would cause massive inflation
when this extra cash is multiplied through the fractional reserve system. In
short, without legal restraints on the capital reserve ratio, or massive public
repugnance at giving money to banks, the British government is just as incapable
of coming out of debt as this imaginary one. This is exactly where the
deflation/inflation argument comes in, but this is already too long. It fits
well with part III anyway.

I'm sorry that this is more long winded than I, as I have yet to explain to
enough people to work out what parts I can cut down. If you see any mistakes,
glaring or otherwise, do speak up....


*As it transpired, most of these people simply took cash out of Nork and walk
across the road and place it another bank, such as HSBC. Nork would then sell
it's assets / loan money with the assets as collateral from HSBC, and request it
"in cash" which would go back to Nork so they could give it to the next round of
customers coming in and asking for their money. This was however very costly,
due to the high price paid for loans / low price Norks assets were valued at,
which is why they asked for BoE assistance.

**"Golden Gordon" = "Goldon"? No?

***The government has every reason and every capability to fake inflation data.
The main reasons are (1) To keep public sector pay down, (2) Appear that they
have a stable monetary policy (3) Keeping interest rates down, encouraging more
of this "growth" (4) Lie about how much this "growth" is in the first place. The
main capability involves making sure goods that are known to go down in value
have a high weighting in "inflation basket", such as computers and electronics
(recently in the US, Blue-Ray players), and those that go up, such as fuel and
house prices, have low weighting or none at all. At the end of this year, you
may well see house prices added to the "inflation basket", as they would make it
lower than it really is.

III

[Gość: deos]

This section promises to be shorter, and less well constructed than the others.
That said, I think you will find it interesting; let's start with deflation and
hyperinflation.

From last time, 97% of all money in the UK is debt-based, better known as "Bank
Money" or "Balance".* In a system where no new debts are being taken, such where
it is impossible to get a mortgage/credit care/corporate loan, one expects that
the total money supply will also decrease with a decrease in debt, as they are
largely equivalent. Though I said before** that in a 100% debt-based system debt
can never be extinguished, it can clearly decrease in the short term;
bankruptcies, en-debted people selling their goods to be people with capital and
so on can all reduce the total outstanding debt, and thus the total supply of money.

So entering into this current "financial crisis", it at first appears that we
will have a decreasing money supply, with more people either going bankrupt or
paying off their debts, and simply not spending. This effect makes money
"scarcer", it drives prices down by a lower demand for goods as money becomes
more valuable. This is the classic deflation scenario that happened in the
(first) great depression, and (I believe) has been happening in modern Japanese
for the last 20 years. This necessarily requires reducing the number of units of
money that is lent out on a given unit of cash, which, again, is about 30 in the
UK today.

Such deflationary effects are more or less wiped out by the effect of central
banks efforts to "provide liquidity" to the markets, to use the obsequious words
of December newspaper headlines. "Provide liquidity", "Inject money supply" a
menagerie of terms have been used to describe central banks efforts to "calm the
waters of the market", such obfuscating terms should lead one to be immediately
suspicious, especially when the total dollar value of such actions was around 1
Trillion dollars. A more accurate and less used phrase is "monetizing the debt".

In this system with 97% debt based money and 3% is cash, if people start to come
in and ask for their cash (this can be private or corporate banking customers
remember), and there are few new investors, the system is massively
destabilized, as the bank needs to start calling in more or the loans they gave
out.*** In this sort of a world, that is todays world, all banks are desperately
crying for more cash. Central bankers, whose ears are ever by the modern bankers
mouths, are simply giving them what they want, and giving lots of it. Sure, they
are charging quite high interest rates for lending out this cash, but as you
know now whatever cash the central banks lend out, private banks can lend 30
times the amount lent in the first place. While the effect of reducing the
amount of money lent out on a single unit of cash will still happen, the money-
multiplier as it were, if the change in number of units of cash increases faster
than this multiplier is decreasing than the money supply will increase anyway.

This is called "monetizing the debt" as the central bank is exchanging cash for
debt based money from the private banks. In other words it is changing what was
at first money the bank lent out on cash it didn't have into real cash,
rewarding their fraud. As I have mentioned several times, inflation occurs
almost entirely because of an increase in the money supply, and you can see now
that if enough of this debt is monetized the the inflation will be massive,
perhaps even "hyperinflation", where inflation becomes best measured on scales
shorter than a year.

Now, how can you tell which of these scenarios will happen? At the risk of
becoming very boring, central banks lending to private banks is very different
to private banks lending to private banks, as central banks lend cash, that is
they lend money which can be re-lent on many times, and this lending is possibly
the most important factor of the coming years. Can we tell how much they will
lend? It may not have been decided yet (though I believe it would be naive to
bet on that). Can we even tell how much is being lent now, let alone what will
be lent? In the UK, apparently only when the BoE chooses to make a press release
about it. I have checked the money supply data from the bank of England, and I
can find no addition in December for the M0 lent out. If you have read the
papers closely over the last few weeks, you'll see that the Bank Of England has
been after, and will very likely be granted, powers to aid banks without
informing the public or perhaps even anyone outside of Gordon Brown and Alistair
Darling. They will be able to secretly print as much money as they deem fit, and
they have already deemed fit to print a lot. These actions lead me to be that
the BoE will choose hyperinflation, as they have specifically sought powers
necessary for such a scenario to be hidden from the public. Hyperinflation
trumps deflation in many ways, in that it makes old debts look smaller ,
somewhat "cushions" the fall in the value of housing,**** and decreases the
value of the currency helping manufacturing and exports, though it completely
destroys anyone's efforts to save (such as anyone holding a pension of pretty
much any kind).


*I'm told that this latter term is slightly less confusing blink.gif

**Consider the man who takes 100 pounds in debt money, waits a year until he
owes 1007 pounds, and then repays with the 100 pounds. Clearly the debt as
decreased, but it can never be extinguished (without bankruptcy).

***From the last section of part I

[korkix78]

Wiesz, na dobra sprawe mamy tu wyjasnienie na czym polega mnoznik
kreacji pieniadza, baza monetarna, rezerwa obowiazkowa i tego typu
zabawki.

Tyle, ze w sposob umiarkowanie przystepny, i nie zazyna mozgu.

Ale dobrze sobie odswiezyc wszystko.
Swoja droga, gdzies czytalem niedawno, ze tak naprawde nie wiadomo
ile zlota DEF w USA chomikuje, bo na dobra sprawe nikt tego nie wie,
no i audyt praktycznie nie istnieje.
No i sugestia,ze jest go znacznie mniej.

Ale analiza dalej idacych konsekwencji, troche przerasta moje
zdolnosci ekstrapolacji;>

[korkix78]

DEF = FED ;>

Za duzo gry w traviana...;>