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mathematically perfected economy™ (MPE™)    1  :   the singular integral solution of  1) inflation and deflation,  2) systemic manipulation of the cost or value of money or property, and  3) inherent, artificial multiplication of debt into terminal systemic failure;    2  :  every prospective debtor's right to issue legitimate promises to pay, free of extrinsic manipulation, adulteration, or exploitation of those promises, or the natural opportunity to make good on them;    3  :  our right to certify, to enforce, and to monetize industry and commerce by this one sustaining and truly economic process.

MORPHALLAXIS, January 14, 1979.

Mathematically Perfected Economy™ FORUMS, DISCUSSION

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 Post subject: Can/does money supply increase faster than goods/services
PostPosted: 14 Dec 2008, 2:13 pm 
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Joined: 14 Dec 2008, 1:15 pm
Posts: 1
First of all until I chanced across your website about a week ago (I was linked from a nolanchart discussion of Zeitgeist), I had no interest in economics whatsoever because I am by nature anti-materialistic and am disgusted by its ambiance of pretentiousness. Of course that means I have a lot of catching up to do, but it also means that my reasoning is unsullied by usurious dogma.

I can relate to your recollection of the birth of your ideas, because you highlighted some characteristics similar to my own. For example, when integration was first introduced in my calculus class (integration by definition), I knew that the method presented was definitely not the easiest way. Because I knew all functions or conversions should have inverses and because of the relationships between position, velocity, and acceleration it seemed reasonable that reverse derivation would be somehow related to integration, I figured out the practical application of the second part of the Fundamental Theorem of Calculus within an hour, though I didn't bother to formally prove it.

As I read through your pages, I often found myself entertaining phantom premonitions of exactly where your line of reasoning was heading, and I must say that my life is forever changed by the realizations you helped me reach.

That was probably more than enough introduction, so let me get to an idea I had. I do not think the idea is of any vital relevance in the scheme of things, but to expedite the development of my understanding it will be useful to initiate discourse.

A repeated caveat in your refutation of the causality between increase in money supply and prices of goods in services is that we cannot know that a situation in which the circulation exceeds the value of goods and services can exist.

While it is true that is impossible to take out a personal loan exceeding the value of the collateral, are not business loans granted in exchange for future promise of profits? This would necessarily decouple the circulation from the value of collateral, and once that is established some logical conclusions follow.

The Fed prints new money in the amount of the total loans it gives out to commercial banks. In turn, these banks loan out this new money to businesses and individuals, but loans issued do not detract from the total reserve of the bank. At 10% a reserve requirement, 90% of a deposit made to a bank can be loaned back out, and since commerce is designed so that virtually all money is deposited in banks when not being used, the money from all loans will eventually return to a bank in the form of another deposit. This sets up a fractional multiplication represented by the infinite series sum[(0.9^n)(original Fed loan)] which adds up to 9 times the original loan from the Fed.

This process occurs with every dollar issued by the Fed until it is fractionally multiplied in bank reserves to a sum of 10 dollars. This multiplication is advanced every time money is redeposited into the banking system, and the only way to lower the ratio of total reserve value to printed money in circulation is to print new dollars at the Fed that have not yet been subject to fractional multiplication.

Thus, if the system were allowed to continue without being constantly flooded with new dollars, the amount of money represented in bank reserves would be ten times greater than the total circulation of currency. The spontaneous withdrawal of a mere 10% of total bank reserves would therefore stress the system beyond its capacity, and because that is certainly a conceivable scenario, new money must be constantly printed no matter the circumstances.

Accordingly, unless I have erred in a base assumption, it seems to me that it is not only possible but quite necessary that the circulation exceed the total value of goods and services.




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 Post subject: Re: Can/does money supply increase faster than goods/services
PostPosted: 14 Dec 2008, 11:47 pm 
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Joined: 29 Jan 2008, 6:06 pm
Posts: 731
Quote:
Can/does money supply increase faster than goods/services?

Yes it does & Yes it can under the central Banking policies.
But we for sure don't know by how much since the M3 statistics has been stopped.

Sources:
Quote:
Results 1 - 10 of about 205,000 for The Fed M3. (0.21 seconds)
Search Results

1.
FRB: H.6 Release--Discontinuance of M3
9 Mar 2006 ... On March 23, 2006, the Board of Governors of the Federal Reserve System will cease publication of the M3 monetary aggregate. ...
http://www.federalreserve.gov/releases/h6/discm3.htm - 3k - Cached - Similar pages -
2.
M3
TABLE A March 23, 2006 M3 AND NON-M2 M3 BILLIONS OF DOLLARS Data on M3 and non- M2 components (except for institutional money funds) cease with the week ...
http://www.federalreserve.gov/releases/ ... 6hista.txt - 47k - Cached - Similar pages -
3.
Money supply - Wikipedia, the free encyclopedia
When the Federal Reserve announced in 2005 that they would cease publishing M3 statistics in March 2006, they explained that M3 did not convey any ...
en.wikipedia.org/wiki/Money_supply - 86k - Cached - Similar pages -
4.
The Prudent Investor: Unpleasant Trend - Fed Counters By Stopping ...
12 Nov 2005 ... M3 is the most important money aggregate for economists, analysts and Fed watchers to get an idea at what speed the (electronic) printing ...
prudentinvestor.blogspot.com/2005/11/unpleasant-trend-fed-counters-by.html - 55k - Cached - Similar pages -
5.
The Federal Reserve, M3, and Inflation :: Discursive Monologue ...
The Federal Reserve stopped reporting M3 because the governors believed .... If I remember correctly, the Federal Reserve discontinued M3 in early 2006. ...
http://www.discursivemonologue.com/2008 ... inflation/ - 46k - Cached - Similar pages -
6.
The Federal Reserve Discontinues the M3 Chart | Investment Advice ...
8 Dec 2005 ... In Issue #493, Dr. Mark Skousen reports on the impact as the Federal Reserve discontinues the M3 chart, including how investors can profit ...
http://www.investmentu.com/IUEL/2005/20051208.html - 41k - Cached - Similar pages -
7.
US Federal Reserve ceases to publish M3 index - Wikinews, the free ...
On March 23, 2006 the Federal Reserve ceased publication of the M3 monetary aggregate, in line with an announcement it made in November, 2005. ...
en.wikinews.org/wiki/US_Federal_Reserve_ceases_to_publish_M3_index - 33k - Cached - Similar pages -
8.
M3 becomes a liability for the Fed
"On March 23, 2006, the Board of Governors of the Federal Reserve System will cease publication of the M3 monetary aggregate. The Board will also cease ...
members.aol.com/gparrishjr/m3_inflation.html - 16k - Cached - Similar pages -
9.
M3b, repos & Fed watching
The actual full technical definition from the Fed is “M3 consists of M2 plus (1) balances in institutional money market mutual funds; (2) large-denomination ...
http://www.nowandfutures.com/articles/2 ... ching.html - 12k - Cached - Similar pages -
10.
The Money Supply - Federal Reserve Bank of New York
In March 2006, the Federal Reserve Board of Governors ceased publication of the M3 monetary aggregate. M3 did not appear to convey any additional ...
http://www.newyorkfed.org/aboutthefed/f ... fed49.html - 37k - Cached - Similar pages -




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 Post subject: Re: Can/does money supply increase faster than goods/services
PostPosted: 19 Dec 2008, 1:21 pm 
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Joined: 24 Jan 2008, 8:33 pm
Posts: 492
Great questions, especially for a newcomer.

Quote:
A repeated caveat in your refutation of the causality between increase in money supply and prices of goods in services is that we cannot know that a situation in which the circulation exceeds the value of goods and services can exist.

This of course is a theoretical extent to which money can be introduced to circulation. It does not account for effective inflation in the deflationary aspect of the system (although neither does this generally occur in practical implementations), nor does this general pattern account for what I have called "artificial sustention." (See site glossary: http://perfecteconomy.com/pg-glossary-of-terms.html#artificialsustention.) In other words, yes, all "money" is effectively borrowed into circulation, and it is theoretically impractical or effectively forbidden to borrow into circulation more than you are intending to "finance."

Actually of course, the real creditor is the producer who is compelled by the arrangement to accept a promise to pay (note) for the property they turn over to the debtor; and the pretended creditor (central bank) is only issuing the promise of the debtor at virtually no cost to the pretended creditor (central bank).

Quote:
While it is true that is impossible to take out a personal loan exceeding the value of the collateral, are not business loans granted in exchange for future promise of profits? This would necessarily decouple the circulation from the value of collateral, and once that is established some logical conclusions follow.

Still, it is not even the policy of a central bank to loan more than the debtor is intending to collateralize. In other words, the only purported reason for the central bank to enter into the arrangement (via intermediate satellite banks, or otherwise), is to make a profit above the original principal (even as this cost the central bank nothing, still it is the outward deception which it has to sustain to reinforce the deception of credibility); it cannot lend more than the ostensible value of whatever is financed, if it is to sustain the deception of credibility.

Quote:
The Fed prints new money in the amount of the total loans it gives out to commercial banks. In turn, these banks loan out this new money to businesses and individuals, but loans issued do not detract from the total reserve of the bank. At 10% a reserve requirement, 90% of a deposit made to a bank can be loaned back out, and since commerce is designed so that virtually all money is deposited in banks when not being used, the money from all loans will eventually return to a bank in the form of another deposit. This sets up a fractional multiplication represented by the infinite series sum[(0.9^n)(original Fed loan)] which adds up to 9 times the original loan from the Fed.

Effectively, this idea is distinct from *maintaining* a vital circulation; your observations here apply to ostensible industrial and circulatory "growth" (which may be comprised on the contrary of false inflation of "value" [cost]). Fractional reserves ostensibly justify a way to infinitely expand the circulation as necessary to sustain further industry, but all this is still necessarily justified by the value of whatever it ostensibly finances, to enter the circulation.

Your observation thus applies to further, separate sectors/circles of "obligated" circulation, dedicated thereafter to servicing whatever the related, original debt. Like the original circulation, we need to re-borrow ever more to continue servicing this debt (and further debt); and it is this ostensible growth (or further inflation of costs) which is necessary to justify the further borrowing.

So, unless the rules of the deception are broken, those rules contribute to our definition of the ultimate point of failure. The rules preclude borrowing more than the ostensible value of the related property (however tangible/intangible), and, as the general schedule of payment actually exceeds the rate of depreciation (under usury), thus according to the rules of the system there is never more circulation than the remaining/existent value of the related/represented wealth.

Now, if there were money in *our* accessible sectors of the circulation than represented wealth, *we* would, across the whole scope of society, possess more money than we suffer debt; we would possess more money than the value of the property we possess.




mike


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"When the freedom they wished for most was the freedom from responsibility, then Athens ceased to be free, and never was free again."



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While 12,000 homes a day continue to go into foreclosure, mathematically perfected economy™ would re-finance a $100,000 home with a hundred-year lifespan at the overall rate of $1,000 per year or $83.33 per month. Without costing us anything, we would immediately become as much as 12 times as liquid on present revenue. Transitioning to MPE™ would apply all payments already made against existent debt toward principal. Many of us would be debt free. There would be no housing crisis, no credit crisis. Unlimited funding would immediately be available to sustain all the industry we are capable of.

There is no other solution. Regulation can only temper an inherently terminal process.

If you are not promoting mathematically perfected economy™, then you condemn us to monetary failure.



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