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Banks. We need them.
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Jake Andarius
Andarius Trading Corp.
#301 - 2012-04-11 22:34:59 UTC  |  Edited by: Jake Andarius
When you take out a loan, you are borrowing money from a bank in order to pay for something. The bank is giving you money, and you are taking that money and giving it to someone else.

If you instead decided to take a loan then reinvest that money back in the bank (a very unprofitable idea), then it would indeed be a liability to the bank to repay you because you are giving them back the money and not actually using it. In this case, there would be your liability to pay the original loan back, the bank's asset of the original loan, the bank's liability to pay your deposit back, and their asset of the redeposited money (which they will soon loan out again).

Clarifications of the terms assets and liabilities aside, you still have not demonstrated your contention that commercial banks create money.

Andarius Trading Corp. | MD Borrowers and Trustees
Dror Roidcrusher
Balls of Megacyte
#302 - 2012-04-11 22:49:16 UTC  |  Edited by: Dror Roidcrusher
Nice backpedal from the lack of understanding m8. Any positive number in the bank's balance sheet means it must pay you the amount on certain conditions (such as "on demand"). That is an asset of yours and thus a liability of the bank. There is nothing to clarify on that, my previous post explains it pretty well.

The creation of a loan is an extention of credit. Of course a bank does not issue new money (as in reality it is counterbalanced by you paying back eventually - it nets to zero). But they create credit that is still valued in the currency for all intents and purposes, effectively meaning that for giving "I will pay 10k with interest over a year", you receive "alrighty you can withdraw 10k from this moment, it's in your account". And it is in your account, you can use it, and others will accept it - it is productive capital and it is great for the economy. Real banks are allowed to do that (sometimes they have to get more reserves to their account at the central bank from the overnight market to be in line with certain regulations, but this is completely beside the point). But allowing this in eve, where no mechanisms allowing this to take place actually exist? ... no way.

I'm going to bed o/ If you want to read more, you can search for "endogenous money", it's not bad if you ignore the multiplier nonsense part.
Jake Andarius
Andarius Trading Corp.
#303 - 2012-04-11 23:14:24 UTC  |  Edited by: Jake Andarius
Your original argument was that commercial banks have the ability to create money, and that EVE banks would have the ability to create ISK:

Dror Roidcrusher wrote:
CCP will not let players near the creation of ISK...you can't let douchebag players in a computer game with no ultimate consequences near currency creation

Dror Roidcrusher wrote:
I do have that impression [that private commercial banks have the ability to create money], but it is not false.


Now you are arguing a different point, and saying that your original point was wrong:

Dror Roidcrusher wrote:
Of course a bank does not issue new money...But they create credit that is still valued in the currency for all intents and purposes.


Commercial banks do not create money. Similarly, EVE banks would not create ISK.

It is uncontroversially true that EVE banks would be different from commercial banks in that they cannot create checks that are "still valued in the currency for all intents and purposes."

Andarius Trading Corp. | MD Borrowers and Trustees
Adunh Slavy
#304 - 2012-04-11 23:19:12 UTC
Jake Andarius wrote:

You seem to have the false impression that private commercial banks have the ability to create money.



They do. Go read modern money mechanics, you can find it on the federal reserve's web site, among many other such documents.

Necessity is the plea for every infringement of human freedom. It is the argument of tyrants; it is the creed of slaves.  - William Pitt
Jake Andarius
Andarius Trading Corp.
#305 - 2012-04-11 23:22:39 UTC  |  Edited by: Jake Andarius
Adunh Slavy wrote:
Jake Andarius wrote:

You seem to have the false impression that private commercial banks have the ability to create money.



They do. Go read modern money mechanics, you can find it on the federal reserve's web site, among many other such documents.


Increasing the money supply through fractional reserve banking is not creating money base. Issuing checks that are used like money is not creating money base.

In modern economics, only central banks have the ability to create money base.

Andarius Trading Corp. | MD Borrowers and Trustees
Adunh Slavy
#306 - 2012-04-11 23:38:19 UTC
Jake Andarius wrote:

In modern economics, only central banks have the ability to create money base.


If you're referring to hard physical currency, correct. If you are referring to the money supply, you need to take it up with the Federal Reserve, Central Bank of China, the ECB, Bank of Japan, etc. They all disagree.

Necessity is the plea for every infringement of human freedom. It is the argument of tyrants; it is the creed of slaves.  - William Pitt
Jake Andarius
Andarius Trading Corp.
#307 - 2012-04-11 23:44:57 UTC
Adunh Slavy wrote:
If you're referring to hard physical currency, correct. If you are referring to the money supply, you need to take it up with the Federal Reserve, Central Bank of China, the ECB, Bank of Japan, etc. They all disagree.


We are in complete agreement. My original statement was in response to Dror, who was saying that "CCP will not let players near the creation of ISK." The creation of banks in EVE and the creation of ISK are two different issues, unless we are talking about creating central banks in EVE.

Andarius Trading Corp. | MD Borrowers and Trustees
Adunh Slavy
#308 - 2012-04-11 23:51:21 UTC
Jake Andarius wrote:
Adunh Slavy wrote:
If you're referring to hard physical currency, correct. If you are referring to the money supply, you need to take it up with the Federal Reserve, Central Bank of China, the ECB, Bank of Japan, etc. They all disagree.


We are in complete agreement. My original statement was in response to Dror, who was saying that "CCP will not let players near the creation of ISK." The creation of banks in EVE and the creation of ISK are two different issues, unless we are talking about creating central banks in EVE.



Fair enough

Necessity is the plea for every infringement of human freedom. It is the argument of tyrants; it is the creed of slaves.  - William Pitt
Dror Roidcrusher
Balls of Megacyte
#309 - 2012-04-12 07:52:12 UTC  |  Edited by: Dror Roidcrusher
Jake Andarius wrote:
It is uncontroversially true that EVE banks would be different from commercial banks in that they cannot create checks that are "still valued in the currency for all intents and purposes."

It's good to see you understand. At first, I put it simply enough because that is what it is. I was arguing that a bank does not lend out deposits, but in fact creates something (the instantly available accounting entry that corresponds to it's liability to pay). The factual situation is the creation of credit that others will accept in trade and the government will accept as taxes. In EVE terms, NPCs would accept it for your clones, skillbooks, office rent etc. You can easily view this as "new money" for the simplicity of it.
Jake Andarius
Andarius Trading Corp.
#310 - 2012-04-12 13:32:01 UTC  |  Edited by: Jake Andarius
Dror Roidcrusher wrote:
It's good to see you understand. At first, I put it simply enough because that is what it is. I was arguing that a bank does not lend out deposits, but in fact creates something (the instantly available accounting entry that corresponds to it's liability to pay). The factual situation is the creation of credit that others will accept in trade and the government will accept as taxes. In EVE terms, NPCs would accept it for your clones, skillbooks, office rent etc. You can easily view this as "new money" for the simplicity of it.


Our disagreement must have come from a miscommunication, because it seems we largely agree with one another.

I think it is worth reemphasizing that banks in EVE could be created that function without the creation of "bank money" in the form of debit cards, credit cards, and checks. That is, banks in EVE could function by taking ISK deposits and literally loaning that ISK back out. As such, the bank would not be creating "bank money," but the bank could still function as a useful financial entity, assuming all the trust problems were nonexistent.

Andarius Trading Corp. | MD Borrowers and Trustees
Adunh Slavy
#311 - 2012-04-12 17:22:21 UTC
Jake Andarius wrote:
assuming all the trust problems were nonexistent.



Always comes back to this.

Necessity is the plea for every infringement of human freedom. It is the argument of tyrants; it is the creed of slaves.  - William Pitt