Except. The main point of chemical trails, money or other implementations of the messaging bus of a complex adaptive system is THE COMMUNITY it creates. Think the Sapir-Whorf hypothesis, but instead of language determines what you think, expand that to "your messaging bus language determines how your community functions". Yeah there is lots of stuff about money, but how it determines the form and function of the community (as in CAS) is the important part.

The other primary thing to think about money - once you get that it is a messaging bus - is the idea of making money from money. When you understand the function of the system you can then understand that making money from money is not a good idea. This is not a new idea. The concept of throwing the money lenders out of the temple has been around for a long time.

If you understand money, then you will be able to answer this question:

why is making money from money a bad (dysfunctional) idea?

This is XKCD #793 all over

I think there is yet some other thing which has a bit of both your Meaningful and Value. Stuff that you decide you should do not precisely (or maybe precisely and this comment is just not well enough considered) because it's meaningful to you but because you just feel it should be done.

Maybe because you just recognize that someone has to do it and you should at least take your turn if not make it your whole life. Maybe because you want to live in a world where it gets done, even if you live in a society that doesn't provide for it to get done. (no one will pay you or anyone else to do it)

Phrasing these things as meaningful makes it into something someone else can say is simply your choice. If it's important to you, you can do it. And let you shoulder the entire burden for something they absolutely benefit from and should be pitching in their fair share towards in some form or another, if not tax money then time or effort, something.

It is definitely meaningful for some people, the people that are so moved that they actually give their time & energy, but those are people for whom it's actually a large part of their life & identity. I'm not like that. I am not going to volunteer for whole shifts anywhere. I care about a strangers problems intellectually. I care in the sense that I want it dealt with humanely with dignity as if I had the problem myself. I don't care directly and personally, emotionally, unless they are somehow close to me. But I would happily pitch in my fair share if we all were, because it would be small.

It's partially value because we all get value from living in the better world thanks to the various thankless tasks some people perform.

Eh, maybe I'm arguing up the wrong tree and what you expressed already covers this.

I am thinking something like "This thing should get done not because I derive meaning from it.", but really maybe what you're talking about isn't even trying to deny that. The point would still be that I might choose to commit a certain amount of my life capital towards something, because of a certain amount of value and meaning that I, let's say recognize not derive or get, from it.

I'm leaving out fun. You can have fun cooking soup for the homeless. I can not imagine having fun cleaning someone who can't clean themselves and can't pay you to do it.

If you buy regular stocks in a regular brokerage account, you do not incur taxes before selling (with profit).

Same for dividend-distributing ETFs.

But why? I don't understand, I feel like certain exceptions like (credit cards?) or house loans can be built or some personal loans but we all see a disaster which will be billed by govt. thus impacting everybody

The govt itself can then buy ETF's once again / invest money from one way or other via pension funds or other funds (sovereign funds?) to the stock markets themselves or other avenues.

banks basically arbitrage the fact that they are FDIC insured and loans. Nothing wrong with it except the fact that most banks would keep most of the money with themselves and only give chump change to average person or even 0%. If that's the case, why isn't there a bank which can just provide 3% treasury funds or similar or (gold?) and then just help the average person.

I saw a lot of points I agreed upon the narrow banking website on and I'd love to discuss more about the harms of narrow banking compared to fractional and why regulators shot it down/just comparing the two of them.

I see the reasoning for accountants keeping future liabilities off of the balance sheet. I do this myself in multiple contexts.

Still, when making decisions about whether to take out or grant a loan (personal or business) I need to consider future "value" and cash flows. To someone running a business this is probably more important than the balance sheet. So I think the interest recording criticism is valid but relatively minor in the context of the whole article.

I might be guilty of abusing an industry term or two 8)

How does the taxation aspect of it work? Would I have to pay short term capital gains on each transaction that I then make?

They also provide daily interests which seem interesting and about on par with treasury rates so it technically sort of can act as the end result of narrow banking for what I wanted (instead of banks borrowing and spending and containing huge chunks of profit in between, it invests into a safe investment)

> In what sense would America benefit? On an inflation adjusted basis, foreigners often get a negative real interest payment, ie they lose money, for the privilege of lending to the US. That seems like an extremely good deal for America.

Ah it seems that you are right but also that there are some inflation protected treasury but you might be right and I thought about it and doesn't it also bring a new set of problems that America faces.

Basically US can get real goods by giving debts and the real value of what US pays actually lessens over time because of inflation so in a sense, US is able to offset some costs by debt itself but it still has a vicious loop where you start borrowing money just to pay your debt and this starts cutting into your infrastructure hurting the poor the most but also reducing the ability of care etc. effectively making things private if govt cant fund it for many (healthcare) which would impact the poor the most

And this is really tricky as the current model really favours overconsumption and that makes more goods be easily sold and this is why other countries are willing to do this in the first place.

From what I could observe, the biggest winners would be corporations as US pays corporations get funding or the stock market looks more lucrative etc. Low real rates inflate asset values and this would disproportionately benefit the rich

It also starts to overconsume from other countries and just make it financially unable to operate at the same level combined with globalization to compete globally at everything but the software (doubtful, we will see what happens in the near future) and at the financial level.

So basically from my understanding, it increases inequality, increases overconsumption, benefits the rich and hurts the poor.

Also, basically US loses all major exports for this financial hack of sorts. Doesn't it fundamentally weaken the reality of US?

Another aspect is that since it favours the stock market or overvaluates them, these help vc funds and these vc funds trickle down to startups who can only compete at the software level so they end up subsidizing all costs (mostly human software engineering) plus hardware costs and make them able to offset/run at losses.

Now VC funds end up enshittening most solutions in order to extract maximum profit down the line usually basically impacting the end consumer and thus hurting the reputation of VC companies (and sometimes for good measure)

Theoretically this also subsidizes open source in a very minute way. Software engineers get rich and are able to enjoy the craft and there are subsidies of free storage and server access from basically github aka microsoft and others to basically streamline the whole process as well since these cloud/others also extract some values of open source.

But open source ends up creating better alternatives to VC funded solutions if those solutions exist in the most human-friendly way where profits arent even thought of usually and are run via donations.

Combine this with the fact that in India and China,developers are cheaper and they are having a boom in their VC industry/startup culture as well and they are willing to undercut America because they are simply leaner and usually pick less VC funding overall as well imo

So in a way US's software success can only be relied upon on full monopolies support considering open source and cheaper alternatives and also moral focuses where EU companies would prefer to support EU as US wreckballs into political disaster.

Also in my opinion, most of US software success recently aside from the monopolies or maybe even including them is so reliant on including "AI" and AI fundamentally lacks any moat most of the times and they are actively losing/making 0 profit while spending billions in hopes of beating the competition.

US's export of financial products basically loops this cycle back to probably an over-reliance on AI itself.

So US economy is so damn reliant on AI which is fundamentally unstable partially due to it "earning profit in the middle" or taking this lucrative deal.

Y'know what I feel the issue with this is? that in other countries there is a cap of the amount of destruction/reliance. Usually most countries suffer from the other side of spectrum but America has removed this cap because of it and this weird blend of hyper capitalism just converted into late stage capitalism.

So (when) the AI financial bubble explodes, How would America even rebuild itself?

I don't think there is a free lunch. Not even in this case, what ended up happening was that America took short term profits in long term structural losses and this hyper capitalism lured companies as well to outsource or build factories in china and other countries actively increasing the extent of the loss and there just wasnt any cap.

Something which is lucrative but not sustainable and now its starting to bite back.

A lot of issues I felt that were in America are now starting to feel intentional.

I mean one of my questions is that how can America even be optimistic at this state considering that everyone I talk to admits that AI is an bubble, so yea AI companies still make profits but long term everyone sees an impending doom. It's like a time bomb and I already feel at unease and I observe the same feeling of unease as well from other people.

Another point was that America helped foreigners into the American dream (by exporting a story) or perhaps the silicon valley dream (a lot of S&P companies are built by people who came to america) as it losses even that.

In a way America just incentivized a new form of grifting called financial innovation in this AI bubble era in my opinion by this decision. I am genuinely not sure what America can do at this stage.

I am sorry to say but the future seems bleak. I hope I am wrong but I wish the average american the best of luck and hope in a better future for the whole world combined but being honest, the future doesn't feel good for America.

As for Graeber being controversial: yes, though I vaguely recall "The Dawn of Everything" being (moreso) the trove of interesting historical anthropological hypotheses, rather than "Debt"?

Anyway, it's been a while, but my main point is that I wouldn't let Graeber's controversial-ness stop anyone from reading Debt. If anything, going in with that information makes you think harder about the topics he covers.

One month in 25 years, my partners and I didn't pay ourselves. That's as close as we have got to having issues. We keep six months payroll, corp. tax and VAT in readies. The property mortgage is nearly paid off.

I'm no hacker and I treat finances as a means to an end - no more and no less.

Conversely, when you deposit cash to a bank, you are actually creating a liability on the bank's balance sheet - as you might want your money back one day!

When I deposit a dollar, the bank records a $1 deposit liability. If the bank makes a $1 loan, it creates a new $1 deposit for the borrower.

If that dollar is spent and redeposited, deposits increase even though the amount of base money has not. It looks like multiplication, but what’s really happening is that loans and deposits are expanding together on the balance sheet.

The bank is not creating wealth out of nothing. It now has matching assets (loans owed to it) and liabilities (deposits owed to customers), backed by capital that absorbs risk.

With reserve ratios effectively zero, lending is constrained by capital requirements and risk management, not by reserves. Banks cannot recirculate a single dollar endlessly without sufficient capital.

Fractional reserve is a model only for textbooks, it is not an accurate model of how the banking system works in most western economies with a central bank and sovereign currency today.

>> The more useful limitation in economic terms and in legal terms is on the amount of capital banks need to hold

Well this is usually the biggest of several limitations which impact whether a loan would be profitable to make for a bank or not so i don't entirely disagree but this is a legislative control, there's no "economic terms" here because in general no school of economics understands this or has anything to say about this control which you correctly point out exists and is central to loan decision making. People can argue about the degree of centrality because it's not the only factor so let me put it this way: it's central in a way which any notion of "fractional reserve" is simply not.

So, yes, such as doctor who excels at health science is very likely a really good doctor, but this does not imply that this doctor will excel in every position in the medical system for which doctors are hired.

This is very consistent with my claim that I don't think that "being exceptional in cybersecurity is a pretty good indicator that someone will be successful in other fields".

I know what you're thinking of here, but it doesn't mean anything like what you think it means.

So the US used to have a rule that every bank hand to have a certain percentage of its assets stored in its account at a Federal Reserve bank; it is this percentage which was gradually reduced to 0 by I think 2020. Note that only the funds in that account meet the requirement; a literal pile of cash contributes not a single cent.

The way banks are primarily limited nowadays is via capital adequacy ratio, which is essentially that you need to set aside a particular pile of capital that can be raided to guard against assets falling in value to 0. It's complicated because this pile of capital doesn't come from the money a customer deposits in their account (which needs to be held as an asset to offset the liability a depositor represents), but rather from income the bank makes in other ways. If a bank sells $1 million worth of shares, they get to issue ~$20 million more loans.

If a bank gets $1 million worth of new deposits, they get to issue... $0 more loans. Well, maybe less: if a bank gets $1 million worth of new bitcoin deposits, that probably reduces its capital ratio because bitcoin is such a risky asset.

Fractional reserve banking has economic limits, even when there are no legal limits.

Common and/or various ways the two groups misunderstand each other, and how you help them to anchor to the underlying base concepts? Yes please. For example, we know that interest accrues over time, but we still use shorthand for the annual interest as a step function because it makes intuitively more sense.

I think paxos and xaut have audits etc. from what I know/ I have heard.

Although having more audits is always a neat idea but I was just proposing that there are ways to invest in things like gold and have things like liquid gold perhaps via stablecoin or some other means too basically allowing you to instantly sell gold and gold is a pretty good hedge against stablecoin imo.

I actually once wrote about this idea of narrow banking discovering it accidentally where I wanted a bank which could invest in treasury bonds for inflation protected money or gold.

https://gist.github.com/SerJaimeLannister/c3db4eb84da96decfc...

How do you know how much gold the government is holding? Ask them!

How do you know the government isn't lying? Ask this question loudly enough and meet people with guns!

No, you don't get it. Imagine if there was a single bank and no cash withdrawals. The bank can't run out of liquidity, ever. If you buy something from a company, the money lands in the bank account of the company, which is managed by the same bank. This means as long as there is no cross bank transfer, there is no limit to how much money can be created.

Now you might argue that this is a bit unrealistic, but at least in principle you could artificially engineer a situation like that even in the current system by having large corporations agree to use the same bank for money created by a specific loan.

But here is where it gets weirder. Imagine if there are two banks now. Surely now the idea presented above breaks down the moment there is a cross bank transfer, right? Except it's not that simple. There is merely a limit to how much of the created money can leave the bank in one direction. If the cross bank transfers are balanced so that for every transfer from bank one to bank two, there is a transfer from bank two to bank one, then you are back in unlimited money territory.

This means there is no static limit to the amount of money that can be created. The limit is dynamic and depends on the interactions between banks. Specifically, it depends on the liquidity/solvency of a given bank. This means this limit is purely practical and more akin to friction, rather than a fundamental restriction in the math of banking/accounting. It's like how computers aren't turing machines because they have finite amounts of memory. There is no limit to how much memory a computer can have as long as you can manage to build a computer with that much memory.

The misconception is that if a bank has a capital X, the law gives them power to create loans up to 10X.

What I'm saying is that without the law, the bank could create loans without a constraint, so say 20X, 100X 1000X.

The fractional reserve policy is actually a limit, not the source of lending in excess of capital.

Loans are money creation, and this creation is organic, it doesn't need a charter from the government.

Another misconception is that this money creation is monetary emission or that it somehow causes inflation. It doesn't, because it is gross money creation, not net money creation.

It feels like you're trying to describe the "social contract" between private banks and the rest of society, but putting the full responsibility of "wealth creation" only on one party in the contract: The bank.

The other party, Society, is given access to capital when they borrow. The rate they're charged should be competitive since there is presumably more than one lender. By borrowing money they try to "create wealth", then to repay the loan principal along with a bit of the new wealth in the form of interest.

You can also do jurisdiction shopping: many companies deliberately contract under eg London law instead of local law.

Huh, what? There's no gold deposits in a fiat system, and they still have money creation. And in eg in 19th century Scotland gold was the unit of account, but they scarcely had any gold in the country (yet alone any gold deposits), and they still had plenty of money creation.

> Regarding how banks worked before such laws existed, we could look at the period immediately before the creation of fractional reserve, I would predict that immediately before the rule was put in place, the banks were creating these 1000X (maybe 100X? I don't know) which caused a bank run.

Huh? When would that be? There was no banking system 'before' fractional reserve banking. And what bank run are you talking about? Historically, bank runs basically only happen when a bank has solvency troubles (or when a law pretty much compels bank runs).

> I think a more standard term is endogenous, as in an emergent behaviour of private individuals, rather than exogenous, as in set by a central bank. https://en.wikipedia.org/wiki/Endogenous_money

Sure, I agree that private money creation in commercial banks is endogenous in that sense.

> You are right these are not standard terms, I meant gross money creation as money that is created with a corresponding liability. For example a loan, or a loan with a mortgage on land. The money base increases, but so does the size of the economy represented by that currency in equal increments. Endogenous money seems to map quite cleanly to gross money. Although not all exogenous money is "net" (as in creating currency without an underlying asset).

OK. Technically even the central bank money is created with offsetting liabilities, at least for the mainstream economies and their central banks like the Fed, ECB, Bank of Japan, Bank of England etc.

I say 'technically', because the treasury can just create a T-bill from thin air, sell it to the market, and then the Fed will loan you newly created money against that T-bill.

There's an interesting debate to be had about seignorage and inflation, and about fiat currency vs fiduciary currency.

First, you don't need to print money without a liability to get seignorage income. When the central does a classic open market operation where they buy a bond yield eg 5% for newly created money (naturally yielding 0%, if it's cash), they earn a 5% interest rate differential for as long as that new money is in circulation. That's very similar to how any old commercial bank earns an interest rate differential.

Now this gets a bit more complicated with inflation and/or when the central bank pays interest on reserves held with them. At the moment the Fed pays 3.65% interest on reserves. (Source: https://www.federalreserve.gov/monetarypolicy/reserve-balanc...). But generally they still have a positive seignorage income.

Money created by the Fed and money created by commercial banks contributes to inflation in the same way. The Fed just measures the total inflation that's occurring (and tries to forecast future inflation), and then adapts its own policy instruments accordingly. They automatically take private money creation into account.

About inflation and seignorage: you might think that it's very straightforward and printing more money would lead to more seignorage income. However that's not true in general.

As we noted above, central banks mostly get their seignorage income from the interest rate difference between their assets and liabilities. (Cash and 'reserves' being the primary central bank liabilities.)

When inflation is high, people really cut back on how much cash they hold, at least in real terms. For an example: as the money printing in Zimbabwe really kicked off, people might have held more cash in nominal terms, but in real terms they wallets got lighter and lighter.

In contrast, Japanese people are famous for holding oodles of cash, partially because their years of mild deflation made holding cash relatively more lucrative.

(Turkey is perhaps a good example to follow along, because they want from relatively low inflation in the 2000s to much higher inflation since, but not nearly as catastrophic as Zimbabwe. Or you can look at real money balances in the US through the Great Inflation in the 1970s vs before and after.)

If all you want to optimise for is seignorage income, the optimal rate of inflation is something low-ish and stable. But details depend on how big your economy is, and how easy it is for people to switch to other currencies. So eg the optimal value for Singapore is probably lower than for the US. (Optimal just in the seignorage income maximising sense. Monetary policy typically has other goals.)

About fiat vs fiduciary money: you know fiat money already. Fiduciary money is where you promise to redeem the tokens in some underlying asset on demand. A classic example could be paper money that can be exchanged for gold on demand.

Confusingly, both intermix freely. What I mean is that in a fiat system, the central bank issues fiat money. But the private banks create fiduciary money: your bank typically lets you withdraw your deposit (fiduciary money) as cash (central bank fiat money).

Perhaps fiduciary money is a better term for what you describe as 'net money'?

https://cdn.mises.org/rae9_2_5_4.pdf has some good points on the distinction. (Though keep in mind that the target audience is 'Internet Austrians' who see everything but gold or silver coins as suspicious, and the authors are trying to convince them not to be so dogmatic.)

You might also like 'Those Dishonest Goldsmiths' https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1589709 about the myth that goldsmiths invented fractional reserve banking.

Look to Canada for a much stabler system that didn't have banking crisis all the time. See eg https://archive.is/v13TM

All the examples I brought up are about counter-parties owing money to GS.

> And I don't think goldies lost money on archegos.

At most trivial amounts, yes. Goldman got out of the position really quickly. But your earlier claim was a bit more universal than that.

Goldman ain't stupid: if there were a treasury 'put' on Goldman's counterparties (and Goldman knew that), then Goldman would exploit that and monetise that 'put'. Instead of getting out early as they did in real life, they would demand and get ridiculous compensation for staying in the position, and then enjoy the bail-out.

(Disclosure: I used to work for Goldman for a few years, but not as a proper banker. I liked the place, but I also think they are much less important than people think they are. And I suspect Goldman is partially playing into the perception, because being a villain is cooler than being a middling also-ran bank.

You might like the book 'What happened to Goldman Sachs'. They have never been the same since the IPO in the late 1990s.)

When your deposits are denominated in _current_ dollars, and that's what your customers can demand, then it doesn't matter that your expectation of how many dollars you are going to receive in 2035 is stable. It's about what our assets are worth right now, in case you need to liquidate them to satisfy withdrawal requests.

If you can contrive your deposits to be denominated in 2035 dollars, then long term treasury bonds are 'stable' in that sense.

Similarly, if your deposits are denominated in grams of gold, then gold is a stable backing for those.

If you have a mismatch between what you owe and what you own, then you need a thick equity cushion between your assets and fixed liabilities.

Except in practice it always fail to materialize, neoliberalism has repeatedly been tried everywhere in the western world, resulting in decline instead of prosperity. And people blame the fact that not enough regulations were removed to justify why it failed. So exactly like Communists.

The reality is that the real world is too complex for simplistic ideologies to have positive effects. No matter what kind of ideology.

> And in this case at hand: Canada had much lighter and more sensible regulation in this sector, and they did better. As expected.

As if the only difference was regulations, and not the fact that Canada was at that point part of the British Empire

It's like the commies in the 30s saying that Communism was indeed better, as the USSR had by far the highest growth among industrial nations by then. Forgetting that this growth was mostly due to the fact that Tsarist Russia was lagging far behind before that, and that catching up is always going to cause higher growth.

> * Well not for houses, but like half of Singapore is immigrants that can be taxed to pay for the other half's houses so it works out for them.

The proportion of immigrants is lower than what you say, and we are not taxed more than residents. (I'm an immigrant to Singapore.) In fact, they once even gave me a 50% income tax one-off rebate just because in that year they took in more money than they needed. If I were a politician, I would have only given that one-off rebate to citizens, you know the people who can actually vote for you.

China is poorer than the EU.

> The regulations put in place in the 30s after the great depression were relaxed by Reagan, and unsurprisingly it lead to the reemergence if financial crisis after half a century of financial stability.

The US had inane financial regulations right from the start. And I'm not sure what you are smoking: have you heard of the Great Moderation? See https://en.wikipedia.org/wiki/Great_Moderation

They did move from durt poor to “higher life expectancies than the US” because the state made it an actual goal, with policies designed for that.

> If they liberalised further, they could become richer.

That's just your religious belief. But it has strictly the same factuality as “if you went to church, God would help you be happier”.

> > “FDR didn't exist”.

> Huh?

Maybe document yourself on the massive financial regulations tightening that happened under FDR before saying it has always been the same.

In situations where we still care about dollars, so no hyperinflation or total collapse of the United States, the current market value of a Treasury bond can't actually vary that much. And the amount it can reasonably vary is mostly proportional to how many years are left in the bond.

By the time your bonds reach maturity, you always have more dollars than you started with. Long term you always profit. And you get to choose what length of bonds you buy, so if you want to you can guarantee your dollars increase in the medium or short term on top of the long term.

> No one is talking about bank reserves. I'm talking about assets.

I'm saying you're too worried about "withdrawal requests" a normal bank would see.

It's not. The EMH has been empirically disproven in the 80s.

That's very, very related to being efficient.

> Assimilating the two just Fama's motte-and-bailey fallacy.

No, not at all.