money, how the hell does it work exactly?

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so how does the money go from printing press, to your pocket?

I dont understand the mathematics of this.

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Type: Discussion • Score: 10 • Views: 6,015 • Replies: 30

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@OGIONIK,

ok i guess

the mint

the bank

the business

the employee or something? so the mint gives money out for free somewhere a long the way?

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@OGIONIK,

Not an expert ... but I think the banks return their old torn damaged notes to the mint and swap them for fresh new ones. Adding any new money to your economy lowers it's value.

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@Eorl,

how do we get it tho?

bank umm gets it, lol please dont tell me...

is all money loaned out in the end?

lol for a second i had a conspiracy theory moment.

thats banks REALLy did control the world, i hope someone has a more definitive answer to ease my mind..

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@OGIONIK,

Well, it's all kinda there to begin with. To simply extremely, on day one a bank starts up and says "give me your savings, and I'll grow it for you" You bring in your money, and the banks says "I've got money to lend if you pay me interest" Then the bank makes sure it charges more interest to the lender than it pays the investor, so it covers it's costs and makes a profit. The mint usually only ever swaps money, never injects new money to a system.

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@OGIONIK,

Hope this helps Nik.

http://en.wikipedia.org/wiki/Money_creation

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@hingehead,

aww, come-on hinge, it was more fun just makin' **** up on the fly.

1 Reply

@Eorl,

Oops. Dang, and I had a really cool story about elves and biro caps...

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@hingehead,

so pretty much,

oh yeah thanks hingeywingey!

for the link.

so pretty much, there is something deeply wrong with how our monetary system works, i havent been able to put my finger on it yet...

wth, i cant figure it out, what is wrong with money? something isnt right.....

this system, is stupid. the more i read the more i was like what the hell?
haha, haha seriously, the complete idiocy of how this system works is beyond any words i could use to express it.

we are all slaves.....

1 Reply

@OGIONIK,

I think if Alan Greenspan says he doesn't understand it, then I don't like your chances of getting it by the end of today!

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@hingehead,

hingehead, Good link on the subject of money. All that math stuff at the bottom is confusing. Any of you understand it?

1 Reply

@cicerone imposter,

I am sorry to admit it, but I do understand all of the math at the bottom. I wish we hadn't dragged Wikapedia into this. The concept of money could have been more easily explained "on the fly." I was working on a story involving sheep, cocaine, whores and gold bricks.

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@OGIONIK,

The Federal Reserve Bank of Atlanta has a tutorial on the circulation of money. I believe this excerpt answers your question:

Quote:

How Money Circulates
The Treasury Department ships new paper money and coins to the Federal Reserve Banks; the Reserve Banks pay it out to commercial banks, savings and loan associations, and other depository institutions. Customers of these institutions withdraw cash as they need it. Once people spend their cash at department stores, grocery stores, and so on, most of this money is eventually redeposited in depository institutions. As notes wear out or become dirty or damaged, depository institutions redeposit them at the Reserve Banks.

The whole tutorial is quite interesting. (Here's the link again.)

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@Thomas,

that explains it a little more, but im confused as to how the people who spend the money withdraw it from the first, place, yeah they work at a store, who customers shop at, who also have jobs...

confused. hah. i shall take a moment to digest this information.....

1 Reply

@OGIONIK,

lol. this is quite entertaining. fed>bank>business>worker<=>customer<business<bank<fed?

is that about right? hahaha...

1 Reply

@OGIONIK,

Yes, that's basically how the cycle works. I think you've got it.

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@Eorl,

Eorl wrote:

Well, it's all kinda there to begin with. To simply extremely, on day one a bank starts up and says "give me your savings, and I'll grow it for you" You bring in your money, and the banks says "I've got money to lend if you pay me interest" Then the bank makes sure it charges more interest to the lender than it pays the investor, so it covers it's costs and makes a profit. The mint usually only ever swaps money, never injects new money to a system.

The one advantage the bank has is that it can lend out 10 times what it has in deposits. It creates the money out of thin air. The only problem is there is no actual cash to back it up, so if everyone wants their money in cash ( a run on the bank) they can't pay up and you get a crash. Fractional reserve lending it is called. Look it up and discover how we are all taken for a ride by the money people.

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Of all the contrivances for cheating the labouring classes of mankind, none has been more effective than that which deludes them with paper money.” Daniel Webster

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You earn it. Smile

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@Deckland,

Money only works if the people that use it accept that it has value. But it is the same with all exchange items. Silver and gold only work because they are perceived to have value and a limited supply. If everyone suddenly found that gold grew on trees in their backyard, the value of gold would be zero.

Ultimately, the value of money is based on the needs and wants it can be exchanged for. Without money we would be a barter economy and hugely inefficient. Imagine trying to buy a new car with 12,000 chickens or 3 steers. The economy would barely function without money.

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money, how the hell does it work exactly?

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