Categories

Pragmatic Capitalism

Practical Views on Money, Finance & Life

People just don’t want to believe the truth

« Back to Previous Page
0

Call me cynical, but all this information and proof about how the monetary system actually works is doing nothing but the opposite. People simply refuse to accept the truth because it does not fit with their preconceived beliefs (cognitive dissonance). Like this other day this person was complaining that the 97% of money in circulation (bank deposits) is actually harming the economy by sitting and doing nothing but collecting interest, while the 3% of money (cash) which the majority of people supposedly use are doing all the hard work and struggling to get by. Don’t know how he got that idea, but he also slipped in a little about “how we should go back to the gold standard because gold has intrinsic value” which gave me an insight into where his confusion was coming from…

Its quite amazing really how people twist the truth to their own liking, particularly those who feverishly wish to get back to gold standard and more recently among the cryptocurrency community. People just find the concept of loans being created out of nothing extremely discomforting and sinister that they invent creative explanations to reject it. (I sometimes wonder how belief of an all powerful bearded sky god who created the universe from nothing is more believable than loans/money being created out of nothing….)

Marked as spam
Posted by Incognito 7
Posted on 02/21/2017 7:25 PM
228 views
Private answer

Welcome to the club. I used to spend a lot of time and energy trying to convince people of certain things here. After about 5+ years I realized that most people don’t have the time or the energy to understand it. The rest are politically or ideologically motivated NOT to understand it. There’s a very small portion of the population that is unbiased and open-minded enough to really get it.

But yeah, it’s crazy and kinda frustrating. I mean, I’ve had public debates with really smart people about this who don’t get it. Heck, Paul Krugman didn’t get it when we debated and he’s a pretty super smart guy. Oh well.

I wouldn’t sweat it too much. Even if people learn how the system really works they just find another excuse to hate debt, the govt, etc, etc. I’ve learned to stop caring too much. I am super happy to know that I’ve provided the information for people to learn about it themselves, but if they are too narrow minded to digest it then what do I care?

Marked as spam
Cullen Roche Posted by Cullen Roche
Answered on 02/21/2017 7:37 PM
    Private answer

    It would be extremely easy for the banking industry to clear up how banking works. But no way! I don’t like conspiracy theories at all. Ellen Brown would be in that category. But, when you think about capitalism in general, and the need for higher profit margins and higher market share each quarter, you realize that telling folks actually where their money comes from and where their hard earned savings deposits are going, then you understand that the facts are not good for marketing. There is no need to inject some conspiracy theories at all. This is plain ol’ vanilla capitalism, and any banker VP worth his “salt” is never going to reveal how the system actually works.

    So far Cullen, you have been quiet about the impact of marketing on banking and the generation of loan activity and profits. Bankers like having the US dollar more valuable than the other countries and keeping people in the dark on how and why that happens. Is there a better way that you can think of than keeping quiet about reality (e.g. the “gold standard” is gone forever in the world), and tacitly let the misconceptions continue?

    Marked as spam
    Posted by Dennis
    Answered on 02/22/2017 12:52 AM
      Private answer

      This the “royal you”, meaning you and me (and the folks here).

      Marked as spam
      Posted by Dennis
      Answered on 02/22/2017 1:04 AM
        Private answer

        I think people are accustomed to years of being bank customers prior to taking an interest into the how they work, and so it colours their thinking on the subject. As bank deposits personally are their their assets they approach the subject with deposits as the prime focus and the source of value, and so they find it hard to make the mental leap in recognising that deposits are in fact bank liabilities, and that the assets of the system are on the other side of the balance sheet.

        As for the complaint of bank credit credit harming the economy , well it does allow people to bring forward consumption but the other side of that particular coin is that it brings forward demand.

        Marked as spam
        Posted by Dinero
        Answered on 02/22/2017 11:39 AM
          Private answer

          As far as I can interpret the issue most people have with banks creating loans out of thin air, is twofold:
          1) After ’08 people understandably have an inherent distrust in banks.
          2) The idea of banks, being able to make profit by artificially inflating the currency, does not sit well with them: As the banks main source of profits are essentially coming from a ‘communally shared asset’, an asset of the state. Of course, we know this is not a problem if the banks are making ‘good’ loans, which go to ‘productive sources that increase value’. But with the event’s of ’08, I think people possibly do not trust that the banks are making ‘good loans’. Meaning that the downside of these loans, inflation, is bore mostly by the currency holder. Whereas the upside of the loans, interest gained, is gained mostly by the banks.

          Essentially the same thing could theoretically happen if I myself were to print £ sterling, in my case, give it as a loan, to a ‘good source’, who used it for ‘productive value creating activity’.

          But folks might not trust that I am actually a good judge of what ‘productive value creating activity actually is.’ Which in this case may be they thought process these people are applying to the banks.
          Does this seem right to anyone here?

          (I should note that this is of course predicated on the person accepting how MMT works in the first place.)

          Marked as spam
          Posted by Jamie Box King
          Answered on 03/20/2017 9:01 AM
            Private answer

            I’ve learned a lot about how our monetary system works from Cullen and a number of other sources (many of which he’s pointed us to over the years) and can say that I’m reasonably comfortable chatting about most of the important basics at a cocktail party. I’ve even had letters-to-the-editor published in Barron’s and the WSJ – which is amusing to me.

            Having said all that – I still run in to an article now and then that gives me pause about the future. A recent article in Reason by Peter Sunderman is an example. Some excerpts: “….according to a December report by the Committee for a Responsible Federal Budget, relying on data from the Congressional Budget Office and the Treasury, spending on interest payments will rise faster than any other program over the next decade, jumping 196 percent. In comparison, military spending, Social Security, and health care programs are expected to increase by 24, 77, and 78 percent, respectively.”

            “That means that without policy changes, debt service payments will almost triple to $712 billion by 2026, and they will double as a share of the economy to 2.6 percent of GDP.”

            I don’t know what sort of growth projections are assumed by the CBO and/or Treasury – and I don’t know about their track records on previous projections. I would not be surprised if their record is below average. I don’t worry too much about interest costs on federal debt getting out of control, but I do wonder about the impacts of Social Security and Medicare. I’ve read about projections that show Social Security and Medicare consuming pretty much the whole federal budget (relative to today) by 2030. Will somewhat minor tweaks (taxes) fix that? Will those programs need to be slashed by 25% in 2030 as some suggest?

            Perhaps “printing” money will be part of the solution, so it really comes down to living standards, not solvency, as Cullen has reminded us many times.

            Marked as spam
            Posted by Steve W
            Answered on 03/20/2017 4:37 PM
              Private answer

              No doubt.

              However I wonder if there is really much that can be done about the living standards situation at present myself.

              Healthcare wise, I am sorry to say but as I live in Scotland I do not know that much about medicare myself. What I can say is that there is very much something to be said for ‘selective socialism’, in so much as that Scotland essentially has a socialist healthcare model, the NHS. We pay a tax, national insurance and in return (most) care is provided free at the point of need(there is some private provision, but few want charged twice. Personally, I think it is great, although I am not too sure how it could work in America. Whatever is to be said though, you guys do spend an awful lot of money on healthcare, 17.8%, which seems to me to be a bit of an outlier, globally speaking. Compared to the UK at 7.3% or say Hong Kong at 5.7%. I wish I could offer some suggestions, but it appears that somewhere there must be some form of structural issue as frankly the spend is way out of line with other countries, especially more so considering almost half of the is public expenditure.

              As for living standards i’m not personally too confident there exists an immediate solution in the short to medium term. Generally wages are preforming too poorly, which i sort of mainly put down to an oversupply in the labour markets.

              So unless globalization and innovation increases to a pace where we can essentially start to employ more high skilled labor, or quite radically consider trying to further stem the population growth. I don’t really see where the exists much of an opportunity for the provision of these sort of services as the NHS. Maby we can improve productivity or we may simply have to increase taxes.

              Marked as spam
              Posted by Jamie Box King
              Answered on 03/21/2017 1:41 AM
                Private answer

                The nasty complexity of healthcare in the US is research. The US dominates global medical research, and a lot of that cost is baked into the 18% spending number. The implication is that socialization would have far different effects in the US versus other countries that play a smaller role in medical research. That’s not to say it’s perfect, I’m sure we spend too much on ED pills and not enough on hard diseases. Certainly there are structural reasons for the high cost that don’t benefit anyone as well. The point being that we cant snap our fingers, socialize the system, and expect American (and global) health outcomes to improve while spending 8% less of GDP.

                Marked as spam
                Posted by advt
                Answered on 03/22/2017 2:03 PM
                  « Back to Previous Page