In message , Tim writes
You are limiting your analysis to the strict definition of 'money supply' and if I may say so, in a rather unimaginative way. You will see form my other posts that it is just one part of the data.
No, they dont need to. All the costs you refer to end up being paid back into the banking system. No carrot by way of extra interest offered is needed.
Its the only way used these days. I clearly remember Harold Wilson's 'credit squeeze' when banks were banned from lending any more dosh, but that sledge hammer effect has been replaced by monetarism.
Well the BoE doesnt 'influence' interest rates, its sets its own repo rate and the main clearers react instantly but I accept that LIBOR rates and gilt yields tend to predict base rate changes.
>
Payments for imports (which I was careful to mention) included? Not all money finds its way into the banking system.
Central banks are managed by people who know what they are doing (well, most of them are). So when they set a rate, it is a rate that is not grossly out of line with what the market would set for itself. Central banks can tweak rates; that's about their limit.
In message , Padraig Breathnach writes
Yes.
True, but legitimate foreign payments do. The mechanism for making a foreign payment ultimately becomes a transfer in sterling in UK between the importer's bank and the exporter's bank's UK office or correspondent. The sterling remains in the UK and in the UK banking system, of which the exporter's bank is a part. There is a corresponding transaction in the exporters country in which the equivalent amount in the currency concerned is transferred from the UK Bank's office (or its correspondent) in that country to the exporter's own bank.
No sterling leaves the country and no dosh leaves the UK banking system.
So September 1992 didnt happen?
"Padraig Breathnach" wrote
Or, (considering a transfer from the credit facility to another a/c with a balance of zero), it is a pre-cursor to a debit balance AND a credit balance. And when you ignore the debit balance (as you do), you just see the newly created CREDIT balance...
"Padraig Breathnach" wrote
Isn't it obvious?
I'm trying to understand just what the "money supply" measures. "Money" and "money supply" are just names given to the definitions and don't adequately describe the underlying concept that they are measuring. Some people have suggested that they measure "spending power", which is why (credit) bank balances are included (they can be spent using cheques/transfers/debit cards) but why other assets are not (eg debts owed, or widescreen TVs etc) because those need to be "converted" into 'money' before being spent.
But - **in terms of** "spending power", 'credit balances' and 'undrawn credit facilities' are *identical*. There is no distinction between them. No difference whatsoever.
So, clearly the definitions for "money supply" (those which include 'credit balances' but not 'undrawn credit facilities') are *not* measuring "spending power". So just what *is* it that they *do* measure?
"Padraig Breathnach" wrote
Well then can you describe what the money supply actually is - in words, like "it is the total spending power of the population" ?
"John Boyle" wrote
I know of no other way to have a discussion about "the strict definition of 'money supply' " !
"John Boyle" wrote
Personally, I think that it takes more imagination to question established practices than just to go along with them blindly.
"John Boyle" wrote
Of course, but I am asking why they don't use that "full data" to construct (a) more meaningful statistic(s)?
"Padraig Breathnach" wrote
But in order to count something, you need to know what it is that you want to include and exclude from the counting, i.e. you need a definition of the "thing".
"Padraig Breathnach" wrote
You are confusing the properties of SUMs (totals) with the properties of AVERAGES.
True, not every number in a long list of (different) numbers will all be the same (and hence equal to their average).
BUT the total of all those numbers will be their sum whether or not they are all the same, or all different, or somewhere in-between.
It is a FACT that the total "money supply" is equal to the sum of its constituent parts. It can be broken down into those parts relating to each 'entity' in the population. Add all those up, and you *do* get the total "money supply".
"Padraig Breathnach" wrote
EXACTLY - An *aggregation* !
"Padraig Breathnach" wrote
Let's just call all of those, "entities".
"Padraig Breathnach" wrote
The same absurdity is produced when you add up all of those absurdities for the constituent entities, to produce the total (macro-scopic) picture of the economy.
"Padraig Breathnach" wrote
Come on then - tell us all why it is useful to know what total 'credit balances' are! And, of course, include why those people want to know whether-or-not I (and everyone else with 'undrawn credit facilities', all added together) have made any transfers from those 'credit facilities' to improve the 'credit balances' we have elsewhere.
Because, don't forget, if I make a transfer from my current a/c to my savings a/c, increasing an overdraft (in the current a/c) and at the same time increasing a credit balance (in the savings a/c), then I am really in exactly the same position, and the bank is in exactly the same position, and hence so is the economy as a whole.
In message , Tim writes
It is the amount of money people are using.
In message , Tim writes
As I have said elsewhere, 'money supply' is just one measure. You dont ensure the health of a patients just by weighing them alone, but the patients weight is still a valid measure.
In message , Tim writes
The monthly bank abstract takes account of this. Actually it probably wont in your case (because the minimum reporting level is high, i.e. in
1979 it as £250k, so it will have gone up a bit now) but if I have accidentally under valued you then please accept my apology!
"John Boyle" wrote
No it's not - people often leave a lump of "money" in a savings a/c for long periods of time without "using" it.
Unless, of course, you class receiving interest as "using" it, in which case again it's not - you don't receive any extra interest by making a transfer from your current a/c [putting it (further) into overdraft] to a savings a/c.
Next try? ;-)
"John Boyle" wrote
As I have asked elsewhere - a measure of *what* ?!
"John Boyle" wrote
Yes, and we know what their "weight" measures. We also know what their "height" measures.
What do the "money supply" figures actually *measure* ?
"John Boyle" wrote
But that is no use if the "money supply" figures don't take account of it.
Why don't they?
"John Boyle" wrote
Does that minimum reporting level apply to the "transfer" size, or the total overdraft limit, or the total credit balance, or my total "net worth", or my total "spending ability", or some other factor? ;-)
That involves another step: you are now at the rain stage rather than the cloud stage. Once you have drawn on the credit facility, then it is no longer an undrawn credit facility.
At the micro level, it is wiser to deal with money rather than money supply. What the economist sees as money does not differ in any significant way from the common-sense way that the rest of us see it. Money is what we can use to pay for goods and services.
Money supply is a macro-level technical measurement that, as I have already said, is useful to those in a position to manage an economy, and has no direct relevance to the individual managing personal resources.
They ARE different. That's why money is relevant to individuals, but money supply is not.
The money supply is -- well, the money supply. The sum of cash and bank credits. Economists have defined it that way, so that is what it is. They find it useful for certain purposes. I accept that you can not relate it in any meaningful way to your personal finances; it doesn't relate to mine, either.
Hmm. If I (in Ireland) hold a sterling credit in a UK bank which I can draw down at will in euros from the Irish representative of that UK bank, has it left the UK to come into my ownership? You seem to disregard the possibility of the credit being extinguished in the UK system.
Sure it did. It fell between August and October. More seriously, how does is support your view on the power of central banks rather than mine?
"Padraig Breathnach" wrote
But what if you don't make that intermediate step? You can spend the 'undrawn credit facilities' immediately. That makes them equivalent to 'credit balances'.
"Padraig Breathnach" wrote
Well then, that *includes* 'undrawn credit facilities'!
"Padraig Breathnach" wrote
How are you going to measure the money supply, if you are not going to consider the banknotes & coins in **each individual's** wallet/purse/pocket, and the credit balances of **each individual's** bank a/c's?
"Padraig Breathnach" wrote
Well, would you like to explain how you think they are different? -- Solely in relation to "spending power"...
"Padraig Breathnach" wrote
I can define the number of houses down a street as just those with the digits "1" or "2" in their house number. Unfortunately, that measure isn't very useful!
So - just *what* is the economists definition of money supply useful for?
"Padraig Breathnach" wrote
Care to describe any?
"Padraig Breathnach" wrote
I'm not trying to! I'm just pointing out that the "sum of cash and bank credits" is just that - a
*SUM*, made up from *my* "cash and bank credits", and *your* "cash and bank credits", and everyone else's "cash and bank credits" as well. Can't you see that?Scríobh "Tim" :
That money doesn't just sit there magically accumulating interest. It is used. The bank lends it out to borrowers.
It doesn't matter what the account is called. If it's on deposit, it can be loaned out.
"Fachadir" wrote
Hmmm. The bank waits patiently until I make a transfer from my current a/c (putting it into overdraft) to my savings a/c (creating a credit balance), and
*then* lends that amount out to someone else?(1) They've got no more dosh than they had before - so where do they get the dosh to lend out? (2) If they can lend it out after I've done my transfer, then why didn't they lend it out beforehand?
"Fachadir" wrote
If the same person is both "borrowing" *and* "depositng", does that mean the bank can loan out the credit balance to someone else?
In message , Tim writes
As already said, the amount of money that the economy is using. I know you will no doubt try and visualise this on your own account, but you dont matter, its the whole that matters. The demand for money reflects the health of the economy. To go back to the weight analogy.
If you weigh 15 stone but are thin, you could possibly eat all the food on the shelves on supermarket if you so chose then hit a few big macs on the way home. Your weight before plus the weight of all the food on the shelves is your potential weight. In fact, you are a healthy eater and chose not to eat all that food, even though it was available to you to eat. Now the overall health of the nation isnt effected at all by your eating habits, we need a far bigger data sample than that to get any real figures, which is why the state of your own bank account is irrelevant.
BeanSmart website is not affiliated with any of the manufacturers or service providers discussed here. All logos and trade names are the property of their respective owners.