Re: Harkness and money supply

[Leigh Harkness <leigh@xxxxxxxxxxx>]

Harry asks:

>Under the current system how do they increase their money supply without
>trading?

Bank lending.

If I lend you money, I have to reduce my money (and my spending power) to
give you money to spend.

But if you borrow from a bank, the bank does not take money out of someone's
account to give it to you.  What it does is say that you owe me money (that
is your debt to the bank) and the bank owes you money (that is a deposit.)
What the bank has done is convert your debt or IOU into a negotiable IOU
from the bank and that negotiable IOU is money.  That is how the money
supply is increased without international trade.


>You can't just ignore the effects of financial trading.

Financial trading does not increas the money supply.  You can ignore it in
determining the money supply.  Financial traders are just specultating
against each other and speculating on currencies against real traders
(providng some stability).


>But the money being created is not feeding national agendas it is
>feeding corporate agendas.  Isn't this implied by your phrase "
>(nations) socialize the risks."?  It seems to that if people gave more
>consideration as to why money should be created, profits could remain
>private without the apparent necessity to "socialize the risks".
>(eg. What ever happened to the right of a nation's ability to "coin" its own
>money??)


A nation can still coin its own money but coins (an notes) are small change.


>If the money supply in such countries is not increasing because of trade
>how else is it happening? I am not saying that it is the result of an "evil
>capitalist conspiracy", but just that it is the unfortunate consequence
>of a selective system of money creation whose purpose is to regulate growth
>among competeting corporations.


As explained above, money is growing because of bank lending.

Bank lending has always been part of the source of the growth in the money
supply.  However, under the fixed exchange rate system, international
transactions provided another source of money.


Regards


Leigh

______________________________________________________________________
Leigh Harkness                                      leigh@xxxxxxxxxxx