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Thread: Where does the money come from?

  1. #1 Where does the money come from? 
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    If money is created by human, why there still lack of money? If money is come from tradings, how does money been created?


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  3. #2  
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    Sorry, this is in the wrong section. I moved it to the economics section for you.


    Disclaimer: I do not declare myself to be an expert on ANY subject. If I state something as fact that is obviously wrong, please don't hesitate to correct me. I welcome such corrections in an attempt to be as truthful and accurate as possible.

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  4. #3 Re: Where does the money come from? 
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    Quote Originally Posted by lol1986
    If money is created by human, why there still lack of money? If money is come from tradings, how does money been created?
    You ask two different questions there. To answer the first part, yes money is created by humans, but it its value is decided by a number of factors. Originally, money was tied to the value of gold, nowadays, the value of money is tied to its value vs. another currency. I'm sure you've seen at the end of the news each night, they run through how the USD is performing against other currencies, this is where the value of the money comes from. Now I imagine your question is "Why can't we just print more money then", well, if the US government suddenly just printed 30 trillion dollars and distributed it to its citizens, then there is now a whole lot more US currency in circulation, thus its actual value vs the AUD, Yen, GBP is a whole lot less.

    To answer the second part, I've linked a basic description of wealth creation in todays economy for you to read
    Letís say the economy has just three people: Developer Danny, Homebuyer Harry, and Banker Bonnie. At time zero, Developer Danny has $200,000, Homebuyer Harry has $40,000, and Banker Bonnie has $360,000, so there is a total of $600,000 in the world. Developer Danny sees that the housing market is hot, so he spends his $200,000 buying land and building a house that has a market price of $400,000. He then sells the house to Homebuyer Harry. Harry makes a 10% down payment of $40,000 and borrows $360,000 from Banker Bonnie.

    Now, in time one, Danny has $400,000 in his pocket, up from $200,000. He has that $200,000 profit because he has created that much value - he took stuff that was only worth $200,000 and he made it worth $400,000. Good for him. Harry has a $400,000 house and a $360,000 mortgage, so his net worth is $40,000; Bonnie has a $360,000 mortgage asset. There are $800,000 in the world now, thanks to Danny. Danny has $400,000 he can use to build more houses or buy expensive sports cars; Harry can get a home equity loan to renovate his kitchen, because he has positive equity; and Bonnie can get more loans against her $360,000 asset.
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  5. #4 Re: Where does the money come from? 
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    Letís say the economy has just three people: Developer Danny, Homebuyer Harry, and Banker Bonnie. At time zero, Developer Danny has $200,000, Homebuyer Harry has $40,000, and Banker Bonnie has $360,000, so there is a total of $600,000 in the world. Developer Danny sees that the housing market is hot, so he spends his $200,000 buying land and building a house that has a market price of $400,000. He then sells the house to Homebuyer Harry. Harry makes a 10% down payment of $40,000 and borrows $360,000 from Banker Bonnie.

    Now, in time one, Danny has $400,000 in his pocket, up from $200,000. He has that $200,000 profit because he has created that much value - he took stuff that was only worth $200,000 and he made it worth $400,000. Good for him. Harry has a $400,000 house and a $360,000 mortgage, so his net worth is $40,000; Bonnie has a $360,000 mortgage asset. There are $800,000 in the world now, thanks to Danny. Danny has $400,000 he can use to build more houses or buy expensive sports cars; Harry can get a home equity loan to renovate his kitchen, because he has positive equity; and Bonnie can get more loans against her $360,000 asset.
    This does not explain how the banks create the money to start with. The banks basically create money 'out of thin air', when there is a demand. And they have a economy created where everything has a price tag. So, the banks control the weapon to be able to obtain basically anything on the planet. And the banks are linked with the governments who also have strong ties with multi-national corporations, all of which have strong profit based intention. This is a deadly mix of power. Money is a weapon used for social control, by a government which enforces an economic system that ensures social debt.
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  6. #5 Re: Where does the money come from? 
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    Quote Originally Posted by lol1986
    If money is created by human, why there still lack of money? If money is come from tradings, how does money been created?
    You sound as a follower of the Zen path does. Money is artificial, and value is subjectively determined. Though humans create money, humans also horde money. Though money is made in trading, those that trade most keep most. Eventually those without remain without, and those with remain with.

    Ultimately, we exist in a lie and trade things of no value for things of value. No matter how much money one obtains, they will be empty until they find that which is of true value. I am happy for those poor due to circumstance, for they know of true value. I am sad for those of unlimited wealth, for they know emptyness.
    Om mani padme hum

    "In dishonorable things we are not bound to obey any man." - The Book of the Courtier [1561], pg 99 (144 in pdf)
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    Banks can create money out of thin air because we know they're good for it. It's called credit. You create money out of thin air every time you yourself use a credit card. Creating money out of thin air allows for markets to quickly react to changes in the economy, and thus be extremely efficient. It allows business to start with only a good business plan and a strong leader. That provides upwards mobility. Means you don't have to be born rich to become rich. Entrepreneurial spirit and all that. It's the core of our way of life, really.

    If you have a better alternative, stage an October Revolution and we'll see in 70 years how better off your society is vs. the rest of the Capitalist world.
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    Quote Originally Posted by Numsgil
    Banks can create money out of thin air because we know they're good for it. It's called credit. You create money out of thin air every time you yourself use a credit card. Creating money out of thin air allows for markets to quickly react to changes in the economy, and thus be extremely efficient. It allows business to start with only a good business plan and a strong leader. That provides upwards mobility. Means you don't have to be born rich to become rich. Entrepreneurial spirit and all that. It's the core of our way of life, really.

    If you have a better alternative, stage an October Revolution and we'll see in 70 years how better off your society is vs. the rest of the Capitalist world.
    ^ Banks are 'good for it' are they? Then why does 1 % of the worlds population own 40 % of the worlds wealth. Banks only have profit in mind, regardless of the environmental or social cost. Since the federal reserve has been in state there has been an over 90% devaluation of the american dollar. This current economic system is set up so that only a few rich and powerful people truely benefit. 50% of the world lives on less than $2 a day. That is a disgusting figure, considering we are abundant enough in resources, and advanced enough in technology to be able to easily sustain everyone on the planet. We are born into this world, knowing nothing more than what is around us. We accept that 'this is the way it is'. When really this is the way the banks, governments and multi-national corporations have created it, with profit based intention, and without positive management in mind.
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  9. #8  
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    Quote Originally Posted by Numsgil
    Creating money out of thin air allows for markets to quickly react to changes in the economy, and thus be extremely efficient. It allows business to start with only a good business plan and a strong leader. That provides upwards mobility. Means you don't have to be born rich to become rich. Entrepreneurial spirit and all that. It's the core of our way of life, really.
    Creating money out of thin air causes inflation. How can we ever expect to stop the problem of inflation with more inflation? Who are these people that have the power to create the thing that controls the world? They are business minded powers, concerned only with tightening their stronghold on society, through controlling the things we need to survive.
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  10. #9  
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    I thought that.. maybe humans primitively are just selfish (sorry to put it bluntly.. but I'm lazy to find a euphemism on a work day...).. innately if we give something we want something in return.. otherwise we would just give everything out for free.. but that would be a utopian world where people just did service without thinking about anything to gain for themselves.. But of course there are also people who don't value money that much.. I guess different perspectives.. I live in a third world country and showing your 'status' to everyone is a way of life, for some of my friends it symbolizes happiness and a better life.. so everyone does anything in their power to seize it before the other guy does..
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  11. #10 Re: Where does the money come from? 
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    Quote Originally Posted by Velox
    To answer the second part, I've linked a basic description of wealth creation in todays economy for you to read
    Letís say the economy has just three people: Developer Danny, Homebuyer Harry, and Banker Bonnie. At time zero, Developer Danny has $200,000, Homebuyer Harry has $40,000, and Banker Bonnie has $360,000, so there is a total of $600,000 in the world. Developer Danny sees that the housing market is hot, so he spends his $200,000 buying land and building a house that has a market price of $400,000. He then sells the house to Homebuyer Harry. Harry makes a 10% down payment of $40,000 and borrows $360,000 from Banker Bonnie.

    Now, in time one, Danny has $400,000 in his pocket, up from $200,000. He has that $200,000 profit because he has created that much value - he took stuff that was only worth $200,000 and he made it worth $400,000. Good for him. Harry has a $400,000 house and a $360,000 mortgage, so his net worth is $40,000; Bonnie has a $360,000 mortgage asset. There are $800,000 in the world now, thanks to Danny. Danny has $400,000 he can use to build more houses or buy expensive sports cars; Harry can get a home equity loan to renovate his kitchen, because he has positive equity; and Bonnie can get more loans against her $360,000 asset.
    sorry but although this simplified economy is relatively accurate in showing how value is made, it neglects a few things.

    If danny charges 400,000 dollars for the property, the bank loan has to give harry 400,000 dollars because the down payment costs him his 40,000. The bank is a profit driven body, thus it will not give the 400,000 dollar loan expecting only to get 400,000 dollars back. a more likely scenario is that harry will end up having to pay back 600,000 dollars, one and a half times the value of his home.

    so in this simplified economy the land developer would profit 200,000 dollars for creating value, the home buyer would be in 200,000 dollars debt in exchange for being able to own the house before he could buy it with his own money, and the bank has made 200,000 dollars profit because it had the ability to loan 400,000 dollars at time 0.
    physics: accurate, objective, boring
    chemistry: accurate if physics is accurate, slightly subjective, you can blow stuff up
    biology: accurate if chemistry is accurate, somewhat subjective, fascinating
    religion: accurate if people are always right, highly subjective, bewildering
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  12. #11  
    Forum Freshman E(i)lusiveReality's Avatar
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    money represents value. more money in the economy will give less value per unit of money. So getting money out of thin air is something that just facilitates distribution.
    Import > Export. That the favourable Economic Ratio for the human mind .
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