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Commercial bank-created money is money created by the commercial banks of a jurisdiction when advancing loans to a customer who promises to make repayment of that debt in return. Commercial bank money is destroyed by the repayment of the bank loan that created it. The practical limits to the capacity to create money in this form are:
The availability of borrowers with the ability to make repayments.
The availability of capital within banks to sustain bad debts arising on debts that default.
Regulation intended to direct credit or to limit its availability.

The biggest practical limit is the ability of the bank to attract deposits to finance that loan. Sure, that attracting might take place after the loan has been granted. But it always does happen by 4.30 pm that day. When the bank must balance its books. If this were not true then a bank run – deposits leaving a bank – would not be a problem. Also, if this were not true then a bank would not pay interest on deposits. They do.

So, Spud is wrong again – and aren’t we all surprised.

Base money acquires its value because it is used to settle tax liabilities owing, which are legally created debts intended to impart value to a currency.

That’s not true either.

Yet he wishes to tell us all how money works, does he?

11 thoughts on “Nope”

  1. That’s about fiat money. Real money, the money that we use every day, is created & destroyed by the production & consumption of goods & services within the economy. We just use fiat as an inconvenient representative token of value. We really should stop being so stupid.

  2. @Boganboy

    If you think that might happen in any foreseeable future, I’ve got a link to a jpg of a bridge to sell you.

    As our host says often.. there are those things that government probably should do. The entire crypto world may as well be a giant IMF plot to make the case that ‘money’ is just such a thing.

  3. Over in Spudland, we’re being asked to vote on whether we think Saturday’s planned march is a ‘hate march’.

    No doubt he’s expecting a strong vote to support his views. I’m not suggesting for a moment it would be fun to go over there and tweak his tail.

  4. @ Spud Hater ‘thumb up’ emoji

    A friend of mine has posted suggesting he attend the march on Saturday carrying an Israeli flag to prove how peace loving the marchers are. I wonder if he’ll answer.

  5. In which the Conservatives try to gently break it to the Daily Mail that they’re not interested in winning the next election:

    Tories fear Rishi Sunak has ‘already checked out’ after lacklustre King’s Speech with warnings that bold tax cuts at Autumn Statement in a fortnight are the only way to avoid election catastrophe

    Fears were raised that Rishi Sunak has ‘already checked out’ today as Tories warned that the King’s Speech lacked ‘big ideas’ and upped the pressure for tax cuts.

    The PM laid out his Parliamentary agenda for the coming year yesterday insisting the country had ‘turned the corner’ and it was time to build a ‘brighter future’.

    But the crackdown on crime, limited easing of the Net Zero ‘burden’ and phased ban on cigarette sales underwhelmed many Conservatives with a general election looming.

    Possibly the dimmer ones (most of them) who are not married to Indian billionairesses are now dimly sensing that the end is coming for their ‘careers’ and TV doesn’t need another Matt Hancock.


    Treasury chief secretary John Glen told the House magazine he sympathised with concerns about the burden – but stressed that the finances must be stabilised.

    ‘I think there’s plenty in my party who are pretty alarmed at the level of tax. I’m alarmed at the amount of tax!’ he said.

    ‘We’d love to be able to cut more, but we’ve also got to be responsible, make the numbers add up, see debt falling at the end of the period and deal with our primary consideration, which is inflation.’

    “We’ve got to be responsible,” explains Cocktongue of a regime that has successfully managed to double the national debt while substantially increasing taxation and the cost of living.

    “We’ve got to bring down inflation, you see, which we will do by massively increasing the cost of staying alive because of Net Zero innit,” continued the grinning twat, as he updated his LinkedIn profile and twelve more rapefugee boats arrived at Dover.

  6. @Ginny Reckon
    There’s nothing wrong in the concept of a cryptocurrency as a token of value in commerce. As long as the value of the token is set by the quantity of goods & services the token will purchase. That’s exactly the same principle values the government money we currently use. And the same principal one government currency’s valued against another The stupidity has been “investors” valuing the exchange rate between crypto & government when there’s little commerce being conducted in the former to set its real value.
    As our host says often.. there are those things that government probably should do.
    Since government controls the number of its tokens of value in circulation & thus their purchasing power to suit its own purposes it’s arguable that’s something government shouldn’t do. Commerce does it far better.
    The entire crypto world may as well be a giant IMF plot to make the case that ‘money’ is just such a thing.
    Money can never be a thing. It’s part of a process in action & can’t exist independent of it. Something the learned Prof Potato can never get his head round. Creating “money” does not create the corresponding goods & services it would be exchangeable for. And goods & services are the only real things that exist in an economy. There is nothing else.

  7. Andrew C

    I’d enjoy him trying to lecture Hamas on ‘Neoliberalism’ and ‘Country by country reporting’.

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