GOLD

[rgleeson]

Friends - I really think there's some horrific confusion creeping into this money supply debate...

 

I believe it's like this:

 

MONEY CREATION AND LOSS

1. A owns £100, so 'Total Money Supply' = £100

2. B borrows that £100 from A, so A now owns an IOU (which is £100 of money!!!!), so now 'Total Money Supply' = £200 [new money created]

3. If B pays back the loan (so A forced to then tear up the IOU), we're back to 'Total Money Supply' = £100 [new money destroyed]

4. A writes off the loan (i.e. A chooses to tear up the IOU), we're back to 'Total Money Supply' = £100 [new money destroyed]

 

TIME FRAME IS IMPORTANT

Time 1. going to time 2. involves an increase in money supply

Time 1. going to time 3. or 4. involves no change in money supply

Time 2. going to time 3. or 4. involves a decrease in money supply

 

DON'T CONFUSE MONEY SUPPLY WITH WEALTH (TOTAL ASSET VALUES)

An asset can be deemed to be worth £1,000,000 one day (owner is wealthy) and then 10p the next day (owner is suddenly not wealthy) - but money supply has not changed

 

DON'T CONFUSE WEALTH AND INFLATION/DEFLATION

Money supply dictates level of inflation or deflation in the long term, but several other factors come into play over shorter time frames. So its very risky to make arguments that directly connect loans, defaults etc and inflation

 

SO LOOKING AT WRENS RECENT EXAMPLE

I would change it to the following...

 

1 ) Loan -> inflation

[no: Loan -> increased money supply]

2 ) Paying back principal -> deflation, ie. reversal of step (1) and net neutral

[no: this reduces money supply back to where it started - takes years or decades for mortgages]

3 ) Interest payed -> no net effect on the money supply, just existing money changing hands

[yes]

 

But if

4 ) Default -> failure to pay principal, i.e. not a reversal of step (1), which default is net inflationary

[no: it is a reversal of step 1, and its short term effect upon inflation depends upon what else is happening in the economy]

5) Bank pays principal itself with existing money-> makes up for step (4) which gets us back to no net inflation or deflation

[no: same situation as (4) as IOU has been torn up]

 

Or

6 ) Bank is broke and cannot pay the principal itself -> net inflation, i.e. not a reversal of step (1)

[no: if bank goes bust, this is asset/wealth destruction which does not affect money supply, and any effect upon inflation depends upon what else is happening in the economy]

7 ) Central Bank gives new money to the bank to pay the principal -> net inflation, as step (1) is reversed but the man behind the curtain created an equal amount of new money!

[no: CB exchanges cash for the banks MBS's which are just assets whose price has fallen (so not influencing money supply at all), and the CB gets the new cash for this action by its own new borrowing via issuance of new long bonds (90% taken up by foreigners) which does create new money in the UK system. Again, any effect upon inflation depends upon what else is happening in the economy]

 

...at least that's how I understand it

 

 

Well I thought we were using inflation/deflation in the traditional and not modern sense, i.e. to refer to the money supply, not prices...

 

 

[hotairmail]

It is inflationary the maximum extent because all the banks that lent money to NRK got their money back in one day rather than receiving it over years.

 

I'm sorry ziknik, I don't understand that. Correction. I see what you mean...the government stepped in to provide funding when investors (banks, ordinary depositors, hedge funds etc) disappeared. But you argued earlier that repayment of loans is deflationary. Is it different here? The effect of the repayment of a bank's loan is in itself deflationary - but of course if they then go straight ahead and lend it out again, then it has no effect. It rather depends on whether the government's money is 'new' money or re-deployed (and where re-deployed from).

 

It could be deflationary if people paid back their loans within a few years but they are not going to do so. They are going to move their loans to another bank so it will make no/little difference.

 

Given all the banks are having trouble increasing lending to support house prices, this extra requirement at this time would be difficult for them to support. In normal times, I would agree with you. The NR situation of reducing the book has the effect of reducing the lending capacity in the overall banking system.

 

 

[Magpie]

Friends - I really think there's some horrific confusion creeping into this money supply debate...

 

I believe it's like this:

 

...

 

That's a very good summary. And I llike the bit about timeframe, meaning that deflation and inflation depend on when you start measuring from. Thanks for the time taken. Only one observation:

 

DON'T CONFUSE MONEY SUPPLY WITH WEALTH (TOTAL ASSET VALUES)

An asset can be deemed to be worth £1,000,000 one day (owner is wealthy) and then 10p the next day (owner is suddenly not wealthy) - but money supply has not changed

 

DON'T CONFUSE WEALTH AND INFLATION/DEFLATION

Money supply dictates level of inflation or deflation in the long term, but several other factors come into play over shorter time frames. So its very risky to make arguments that directly connect loans, defaults etc and inflation

 

I got pulled up for confusing wealth destruction and money supply earlier, which I don't believe I was doing. What you say above is quite correct. However there are a few other issues.

 

Banks directly own assets also - if these shrink in value, this creates a pressure for them to take in more money than they lend out to rebalance the books. This is what happened in the case of mortgage-backed paper. So if they fall in value, or get written off, no immediate fall in money supply, but deflationary pressure. (Bear in mind also the role of off-balance sheet write-offs that have to be brought back onto the books.)

 

Secondly, during a bubble, a lot of people have 'wealth' in the form of assets, houses etc. In the case of houses, banks will lend against that value, so the more they are 'worth' the more likely banks are to create money. Secondly, as long as people have the back-up of wealth (no matter how illusory) they will continue to spend money into the economy, even if this means doing so on credit, so they will keep asking the banks to create more money for them.

 

Once that wealth disappears, people (and companies) can no longer borrow against their assets to the same degree. Nor can they keep spending into the economy and ignoring their debts. So the ratio of how they spend money changes. More goes into debt repayment (deflationary) and debt servicing (neutral in terms of money supply, but deflationary in terms of prices as it takes money that would have chased other goods).

 

So wealth destruction/asset writedowns does not directly affect money supply, but it does create deflationary pressure. And that deflationary pressure may take a long time to work its way through the system. Wealth destruction can be a long-term cause of the money supply shrinking or stagnating, even though it does not in itself constitute money supply shrinkage.

 

(Once again this doesn't mean the overall situation is deflation, just that there is a significant pressure created).

[hotairmail]

I think we're going to get the chance to see whether default results in inflation or deflation....

 

http://www.moneymarketing.co.uk/cgi-bin/it...;h=24&f=254

 

Moneymarketing report HBOS prime rmbs mortgages with an incredible arrears rate of 4.1% ( we haven't even stated a recession yet!).

 

If you think of the interest rate differential between a borrower's prime mortgage and the funding costs (south of 1%) you can see what damage default will wreak.

[wren]

Well I thought we were using inflation/deflation in the traditional and not modern sense, i.e. to refer to the money supply, not prices...

Yes, I was using inflation/deflation as synonymous with increase/decrease of money in the system.

 

But anyway, some bits of my example seem to be wrong or in need of qualification.

(I tried to keep it really basic, thinking that really there are all sorts of flows going on over time, but ignoring that.)

 

Thanks to bigtbigt for the clarification.

[ziknik]

I'm sorry ziknik, I don't understand that. Correction. I see what you mean...the government stepped in to provide funding when investors (banks, ordinary depositors, hedge funds etc) disappeared. But you argued earlier that repayment of loans is deflationary. Is it different here?

 

Did I ? I didn’t mean to . Where?

 

Can you point it out to me so I can clarify (back peddle )

 

The effect of the repayment of a bank's loan is in itself deflationary - but of course if they then go straight ahead and lend it out again, then it has no effect. It rather depends on whether the government's money is 'new' money or re-deployed (and where re-deployed from).

 

The effect of the repayment of a bank's loan is in itself deflationary if you consider it in isolation - but of course they then go straight ahead and lend it out again. and the bank received interest and now has an ability to lend more (10 times / 50 times the amount it received interest).

 

Over the course of a mortgage the interest may be 100% of the amount borrowed or more.

 

Given all the banks are having trouble increasing lending to support house prices, this extra requirement at this time would be difficult for them to support. In normal times, I would agree with you. The NR situation of reducing the book has the effect of reducing the lending capacity in the overall banking system.

 

I agree with you.

 

It’s a bit impossible to give an absolute definitive ‘inflationary’ or ‘deflationary’ in a real example because there are some many banks interacting with each other.

 

But remember, reducing the lending capacity in the overall banking system is not deflationary. It is less inflationary

[hotairmail]

3 ) Interest payed -> no net effect on the money supply, just existing money changing hands

 

Couple of points - don't forget the effect of default wiping out capital which results in a multiple of that reduction in lending capacity. In extremis this can cause the calling in of loans and/or reduction in lending going forward.

 

Secondly re interest. Interest is added to the loan held at the bank. The effect of paying interest reduces this balance but causes money to be removed from the system in much the same way as a repayment of principal. There is no effect on notes and coins in circulation but would impact deposit holdings where the customer's earnings may otherwise go. So it is deflationary. (unless and until it tops up the banks capital via the profit and loss account, increasing its lending capacity and it is used for additional loans as a multiple of the additional amount of capital).

[ziknik]

…

So

1 ) Loan -> inflation

2 ) Paying back principal -> deflation, ie. reversal of step (1) and net neutral

3 ) Interest payed -> no net effect on the money supply, just existing money changing hands

…

 

It is over simplistic to look at only one loan transaction, you need to look at a series of the same transaction. In the series of the same transaction (over and over again) the money supply must grow or contract. It cannot stay the same.

 

These are 2 simplified extreme examples.

 

In an inflationary scenario, there has to be an increase in the money supply and it must keep growing. Otherwise we would not be able to repay our debts + interest. So the money supply keeps growing and you or somebody borrows more and more money to keep repaying debt + interest.

 

In the deflationary scenario, the money supply has not increased (or somebody defaults to cause the money supply to reduce). There is now not enough money for repayment of debt + interest, not for everyone. More people default because there simply isn’t the money to repay the loan (for everyone) and the situation keeps getting worse.

 

Both situations are balanced, slowed down a bit by default / new loans

 

4 ) Default -> failure to pay principal, i.e. not a reversal of step (1), which default is net inflationary

5) Bank pays principal itself with existing money-> makes up for step (4) which gets us back to no net inflation or deflation

…

 

The fractional reserve banking system allows the banks to lend several times the money they have.

 

If a bank has £10, it may loan say £100 (10 times)

 

But if the entire £100 is defaulted on, the bank has to pay the money itself and it has lost the ability to lend £1000 (10 times)

 

[Bobsta]

It's nice to see Gold showing some strength while stocks are so weak.

That's how it supposed to work, especially in September

Indeed. But what's suddenly gone wrong with Silver?

Someone liquidating a huge long position? Friday blues? Makes no sense given Gold's resilience.

[rgleeson]

What the hell does the BOE base their interest rate decision on? You would think this stuff would need to be modelled in some super-computer hosted simulation, rather than a committee of old duffers...

[Johan van der Smut]

Indeed. But what's suddenly gone wrong with Silver?

Someone liquidating a huge long position? Friday blues? Makes no sense given Gold's resilience.

 

Although gold's now taking a bit of a dive too.

[hotairmail]

It is over simplistic to look at only one loan transaction, you need to look at a series of the same transaction. In the series of the same transaction (over and over again) the money supply must grow or contract. It cannot stay the same.

 

These are 2 simplified extreme examples.

 

In an inflationary scenario, there has to be an increase in the money supply and it must keep growing. Otherwise we would not be able to repay our debts + interest. So the money supply keeps growing and you or somebody borrows more and more money to keep repaying debt + interest.

 

In the deflationary scenario, the money supply has not increased (or somebody defaults to cause the money supply to reduce). There is now not enough money for repayment of debt + interest, not for everyone. More people default because there simply isn’t the money to repay the loan (for everyone) and the situation keeps getting worse.

 

Both situations are balanced, slowed down a bit by default / new loans

 

On the whole I agree ziknik. I'm just not sure about the point in bold which is widely quoted.

 

There are two provisos I would make...there is always enough money as long as that money continues to circulate quickly enough to run ahead of the growth of interest liabilities so that they don't become unmanageable i.e if you have a healthy economy people can earn their way out of their debts. It shows up as affordability I suppose. So the velocity of money is as important as the money supply itself in terms of meeting debt/interest obligations. (EDIT: effectively the money supply growth simply makes debts more manageable by devaluing them through inflation - but it is the 'velocity' or 'earnings' that makes them payable)

 

Secondly, the interest that gets paid to the bank ends up (assuming it has lent and run its business well) as profits. Those profits may well be used to grow lending and future profits even further. Alternatively those profits are paid out as tax to the government who may spend it or indeed to the shareholders who may spend it. So the interest doesn't necessarily just get stuck at the bank doing nothing...it circulates in the economy earning profits and repaying other debts.

 

Make that three points. Deposits are in a sense a loan to a bank and earn interest themselves which may also go out into the economy. The bank has to find the money to pay its depositors in much the same way that a borrower has to find the money to pay the bank. As you know the depositors' interest is largely paid by the bank from its lending. So the net liabilities may not be as big as we think...the effective liabilities between depositors and borrowers is far bigger than that between the borrower and the bank. And we know in both cases that the money comes out into the economy again anyway (unless something drastic happens).

 

ziknik is my thinking right? I'm not sure. Just doing it from scratch.

[wren]

Some people couldn't see deflation if it wore a big shiny DEFLATION t-shirt and kicked them in the nuts.

 

On a more reasonable note I actually think these kinds of examples can confuse as much as clarify, but here are a couple of thoughts.

 

 

 

When you say 'existing money' where does this money come from?

The point about money supply is that it is out there in the economy and can be spent. If the bank has to take money out of the economy, then yes that is deflationary. And there is the knock-on deflationary effect of causing it to draw future lending in.

When I say money supply I mean newly created money adding to and increasing that already existing. If I take money out of the economy (by withdrawing cash and stuffing it into my mattress, say) is that deflationary? I don't think so. Potentially it reduces the opportunity for my bank to use to lend in future. But I do not regard it as deflationary. Unless it happens to get burnt in a fire or something, it's likely it will be spent some time in the future.

Therefore bank takes a loss of the amount of the loan.

As was included in the simple scenario.

Central bank actually swaps this for an asset or loans it to the bank, which is different.

And do central banks never create new money to lend money? And what if a bank defaults on the loan from a central bank?

The money prevents the bank's loss but only shores up its balance sheet. Either the bank has lost the (admittedly possibly worthless) asset from its balance sheet, or it now has a liability to repay the money to the CB.

 

The point about this last example is that it can be seen as inflationary in one sense, as it prevents the deflationary effect of the bank having to find the money elsewhere. But it is closer to being neutral, and by saying the CB 'gives' the bank the money you're ignoring the fact that it actually loans it or swaps it for an asset, both of which have future deflationary effects (eg the bank will be forced to take more in debt repayments than it loans back out).

We're using the terms deflation and inflation in different ways. I'm concerned with the amount of money in existence not the velocity of money.

 

Also the potential for reduced lending in the future, I take for what it is, i.e. potential not actual. If there is an actual reduction in the money supply, i.e. the total amount of money in existence, then that is what I call monetary deflation.

[Wanderer]

Is anyone clever enough to flip a chart of the FTSE over the last 2 years (i.e. invert it) and overlay it on a Gold price chart for the same period? Reading the paper just now it seems it is rather akin to the recent moves in Gold if you hold the paper upside down...

[qwerty]

Well I thought we were using inflation/deflation in the traditional and not modern sense, i.e. to refer to the money supply, not prices...

 

 

I thought there was an inflation/deflation thread ?

 

http://www.greenenergyinvestors.com/index....=4133&st=40

[hotairmail]

If I take money out of the economy (by withdrawing cash and stuffing it into my mattress, say) is that deflationary? I don't think so. Potentially it reduces the opportunity for my bank to use to lend in future. But I do not regard it as deflationary. Unless it happens to get burnt in a fire or something, it's likely it will be spent some time in the future.

 

This is rather a moot point at the moment is it not?

 

The dollar's role as a reserve currency means that many of its dollars are held overseas (the equivalent of being withdrawn from circulation by being hidden under the mattress) where it has had little impact on driving up domestic prices over the years. This has allowed the us to have lower interest rates and higher money supply growth than normal inflation targeting would allow.

[wren]

SO LOOKING AT WRENS RECENT EXAMPLE

I would change it to the following...

 

1 ) Loan -> inflation

[no: Loan -> increased money supply]

That's what I meant. Maybe I should have said caused an increase in the amount of money in existence.

2 ) Paying back principal -> deflation, ie. reversal of step (1) and net neutral

[no: this reduces money supply back to where it started - takes years or decades for mortgages]

Yes, that's what I meant by net neutral, and I know it takes years.

3 ) Interest payed -> no net effect on the money supply, just existing money changing hands

[yes]

 

But if

4 ) Default -> failure to pay principal, i.e. not a reversal of step (1), which default is net inflationary

 

[no: it is a reversal of step 1, and its short term effect upon inflation depends upon what else is happening in the economy]

We agree that the loan (step (1)) increases the amount of money in existence. That is reversed by repayment of the principal, is it not? If I fail to send it back to money heaven (thin air) by defaulting, somebody else will have to or else it won't get there.

5) Bank pays principal itself with existing money-> makes up for step (4) which gets us back to no net inflation or deflation

[no: same situation as (4) as IOU has been torn up]

If so, the new money from the original loan doesn't get back to money heaven, which means a net long-term increase in the amount of money in existence (what I call inflation for short).

 

Simply tearing up the IOU does not destroy the money created by making the loan.

Or

6 ) Bank is broke and cannot pay the principal itself -> net inflation, i.e. not a reversal of step (1)

 

[no: if bank goes bust, this is asset/wealth destruction which does not affect money supply, and any effect upon inflation depends upon what else is happening in the economy]

In order for the total amount of money in existence not to remain indefinitely elevated

by the original loan it has to go back to money heaven. If the bank cannot pay the ferryman it won't get there.

7 ) Central Bank gives new money to the bank to pay the principal -> net inflation, as step (1) is reversed but the man behind the curtain created an equal amount of new money!

[no: CB exchanges cash for the banks MBS's which are just assets whose price has fallen (so not influencing money supply at all), and the CB gets the new cash for this action by its own new borrowing via issuance of new long bonds (90% taken up by foreigners) which does create new money in the UK system. Again, any effect upon inflation depends upon what else is happening in the economy]

 

...at least that's how I understand it

Yes, so long as the money can be raised and no further defaulting occurs in the future. And where do the foreigners ultimately get their cash from? Is there no inflation in foreign lands?

 

[Magpie]

We're using the terms deflation and inflation in different ways. I'm concerned with the amount of money in existence not the velocity of money.

 

No we're not. I'm rigorously using it to refer to the money supply in the post you responded to.

 

Also the potential for reduced lending in the future, I take for what it is, i.e. potential not actual. If there is an actual reduction in the money supply, i.e. the total amount of money in existence, then that is what I call monetary deflation.

 

Exactly which is why I refer to deflationary pressure, not deflation as the result of this process.

 

 

[Magpie]

When I say money supply I mean newly created money adding to and increasing that already existing. If I take money out of the economy (by withdrawing cash and stuffing it into my mattress, say) is that deflationary? I don't think so. Potentially it reduces the opportunity for my bank to use to lend in future. But I do not regard it as deflationary. Unless it happens to get burnt in a fire or something, it's likely it will be spent some time in the future.

 

No but it may cause deflationary pressure. But if a bank has to find the money from somewhere it finds it from money that would otherwise be relent, so in that case it can be deflationary in pure money terms. My point was you just said the bank uses existing money without accounting for where that money came from. Which concealed the deflationary moment in your example.

 

And do central banks never create new money to lend money? And what if a bank defaults on the loan from a central bank?

 

But that isn't what is happening right now, with the SLS etc. I was arguing about the facts of the current situation, not about the notional situation where a bank defaults

[ziknik]

On the whole I agree ziknik. I'm just not sure about the point in bold which is widely quoted.

 

It’s more difficult to write and understand the deflationary scenario because we have experienced deflation.

 

Most money is created as debt, it requires an interest payment to be made as (or when) it is repaid. To pay the interest, more money needs to be created in the future, usually as debt.

 

In a deflationary scenario, there is negative money supply creation. Assuming the deflation continues, there is not any net money creation and therefore, there is not enough money for somebody to repay their debt certainly not everyone). They default on the loan. The bank is forced to pay the debt on behalf of the borrower and this constrains the banks ability to hand out other loans. There is not enough money creation to meet the demand required to pay the loans + interest. This causes more defaults and spirals out of control

 

There are two provisos I would make...there is always enough money as long as that money continues to circulate quickly enough to run ahead of the growth of interest liabilities so that they don't become unmanageable i.e if you have a healthy economy people can earn their way out of their debts. It shows up as affordability I suppose. So the velocity of money is as important as the money supply itself in terms of meeting debt/interest obligations.

 

Yes, money velocity can slow deflation and stop in spiralling out of control. But money velocity is not enough long term. Sooner of later, money supply must turn positive again or the deflation keeps spiralling out of control.

 

It is not possible for people to work their way out of debt because the money doesn’t exist and nobody wants to borrow or is unable to borrow.

 

The economy is not healthy. The end point is when everyone has defaulted and there are no debts left

 

Secondly, the interest that gets paid to the bank ends up (assuming it has lent and run its business well) as profits. Those profits may well be used to grow lending and future profits even further. Alternatively those profits are paid out as tax to the government who may spend it or indeed to the shareholders who may spend it. So the interest doesn't necessarily just get stuck at the bank doing nothing...it circulates in the economy earning profits and repaying other debts.

 

Yes, the same money circulates around many many times. I’m just taking extreme points of view in my examples for simplicity.

 

 

Make that three points. Deposits are in a sense a loan to a bank and earn interest themselves which may also go out into the economy. The bank has to find the money to pay its depositors in much the same way that a borrower has to find the money to pay the bank. As you know the depositors' interest is largely paid by the bank from its lending. So the net liabilities may not be as big as we think...the effective liabilities between depositors and borrowers is far bigger than that between the borrower and the bank. And we know in both cases that the money comes out into the economy again anyway (unless something drastic happens).

 

ziknik is my thinking right? I'm not sure. Just doing it from scratch.

 

I’m a touch confused by what you mean (in the text I have bolded). I agree with the rest of it.

 

The problem for us is that we are the borrowers and Asia are the depositors. Then again, when it goes to rat **** it we may well find that we have got the better end of the deal.

 

[Errol]

Is the gold monthly thread really the place for this discussion on deflation/inflation etc. ? I find it rather distracting myself and largely irrelevant to the thread title.

 

[qwerty]

Is the gold monthly thread really the place for this discussion on deflation/inflation etc. ? I find it rather distracting myself and largely irrelevant to the thread title.

 

I was trying to be more subtle but agree.

[marmite]

Is the gold monthly thread really the place for this discussion on deflation/inflation etc. ? I find it rather distracting myself and largely irrelevant to the thread title.

 

I agree too

 

Maybe a deflation / inflation thread can be started for this conversation.

 

 

[wren]

It is over simplistic to look at only one loan transaction, you need to look at a series of the same transaction. In the series of the same transaction (over and over again) the money supply must grow or contract. It cannot stay the same.

Well, I deliberately chose a simple example for the purposes of clarifying the mechanics (although simple, my example went from somebody taking a loan to a Central Bank bailing out the lender!)

These are 2 simplified extreme examples.

 

In an inflationary scenario, there has to be an increase in the money supply and it must keep growing. Otherwise we would not be able to repay our debts + interest. So the money supply keeps growing and you or somebody borrows more and more money to keep repaying debt + interest.

Yes, which is why I believe that interest-bearing, debt-based money systems are ultimately doomed (endless economic growth in a finite world is ultimately impossible).

In the deflationary scenario, the money supply has not increased (or somebody defaults to cause the money supply to reduce). There is now not enough money for repayment of debt + interest, not for everyone. More people default because there simply isn’t the money to repay the loan (for everyone) and the situation keeps getting worse.

 

Both situations are balanced, slowed down a bit by default / new loans

Referring to the bolded statement, there never is anyway.

 

Before saying more about deflationary, we had better compare definitions. I mean reduction in the amount of money in existence. Maybe you mean something else.

 

Bearing in mind the possible difference in intended meaning, using my intended meaning, how does default on a debt cause a reduction in the amount of money in existence?

The fractional reserve banking system allows the banks to lend several times the money they have.

 

If a bank has £10, it may loan say £100 (10 times)

Yes, I know.

But if the entire £100 is defaulted on, the bank has to pay the money itself

I think bigtbigt said otherwise. I wonder what the real answer is. This seems an important factor in determining whether the money goes to money heaven or stays in the economy.

and it has lost the ability to lend £1000 (10 times)

Yes. I wonder whether economic growth depends on an increasing money supply or vice versa.

 

Or to put it another way, does the economy depend on bankers or do the bankers depend on the economy?

[Magpie]

Before saying more about deflationary, we had better compare definitions. I mean reduction in the amount of money in existence. Maybe you mean something else.

 

Bearing in mind the possible difference in intended meaning, using my intended meaning, how does default on a debt cause a reduction in the amount of money in existence?

 

Wren, I'll answer this in a new thread on the main forum to take this away from the gold thread...

 

http://www.greenenergyinvestors.com/index.php?showtopic=4167