Here's a money question for everyone

**Greebo** · 09-17-2009, 05:05 AM

How is money created in the US economy?

I do not mean how is paper money made and minted - but rather - what creates the concept of money that shows up in our bank accounts, on our credit cards (ok YOUR credit cards, I don't have one), bank loans, and so forth.

First one to get the answer right (and explain it!) wins a prize.

**ladytoysdream** · 09-17-2009, 06:03 AM

http://economics.about.com/cs/neocla...e_of_money.htm

**Greebo** · 09-17-2009, 06:47 AM

Sorry, links to someone else's answer don't count.

**nodmicks** · 09-17-2009, 07:51 AM

Darn darn darn! I just read this rin RDPD but do not have time to type out the whole answer! Got to get my butt to the shop!

**NikoSan999** · 09-17-2009, 08:34 AM

Not quite sure I understand the question. If I had to hazard a guess it would be either need or want and by the mention of the credit card out of the two I would have to pick want

**Greebo** · 09-17-2009, 08:41 AM

Originally Posted by NikoSan999

Not quite sure I understand the question. If I had to hazard a guess it would be either need or want and by the mention of the credit card out of the two I would have to pick want

Nowhere close, sorry.

By "this economy" I don't mean the current economic climate, but I mean the entire US economy since 1973.

**ri*smom** · 09-17-2009, 01:28 PM

Okay, I am probably way off, but isn't it an indirect bartering system? Instead of directly trading our services/goods (ie--whatever it is you do as your profession) with another, we now use cash to do so . . . sort of as a tally system. I guess using a credit card would then be considered at creating a system of indentured servants since you are borrowing on services/goods you will (hopefully) make good on in the future. Just my best guess.

**Palooka** · 09-17-2009, 01:33 PM

By pure Capitalism, if it works for some.

**Greebo** · 09-17-2009, 01:47 PM

Originally Posted by ri*smom

Okay, I am probably way off, but isn't it an indirect bartering system? Instead of directly trading our services/goods (ie--whatever it is you do as your profession) with another, we now use cash to do so . . . sort of as a tally system. I guess using a credit card would then be considered at creating a system of indentured servants since you are borrowing on services/goods you will (hopefully) make good on in the future. Just my best guess.

It is an indirect bartering system, but that isn't how money is *created* in our system.

Don't focus on the credit card - I only mentioned it as a way of trying to state this isn't about cash bills being created.

Originally Posted by Palooka

By pure Capitalism, if it works for some.

We have never had a purely capitalist society, and money doesn't require capitalism. Socialist and communist nations also use money.

Frankly, capitalism doesn't require money either - you can have a purely capitalistic society that's based on a pure barter system, it just wouldn't be very efficient.

The question isn't "what is money" - money is simply a medium of exchange. The question is what *creates* the monetary supply that we use as a medium of exchange. What determines that there are $38,291,302,381,881 in our monetary system as opposed to $38,291,302,381,882.

**NikoSan999** · 09-17-2009, 01:59 PM

Ok, one more stab here. Supply and demand

**Greebo** · 09-17-2009, 02:05 PM

Originally Posted by NikoSan999

Ok, one more stab here. Supply and demand

In a way, indirectly, I suppose demand does cause it's creation, but there is a very specific tool that causes money to be created. Before the tool is used, the money doesn't exist, after the tool is used, it does.

The tool is a concept that forms the entire foundation for our currency system.

What is the tool?

**Palooka** · 09-17-2009, 02:13 PM

We have never had a purely capitalist society, and money doesn't require capitalism. Socialist and communist nations also use money.

Gah, you are going to make me break down quotes. lol

Socialism(why you want to bring in communist, I will never know) makes makes all people created equal. No matter how much money is attached to their name.

Frankly, capitalism doesn't require money either - you can have a purely capitalistic society that's based on a pure barter system, it just wouldn't be very efficient.

Sure like the gov't and the CEo's?

The question isn't "what is money" - money is simply a medium of exchange. The question is what *creates* the monetary supply that we use as a medium of exchange. What determines that there are $38,291,302,381,881 in our monetary system as opposed to $38,291,302,381,882.

just pure luck?

**Greebo** · 09-17-2009, 02:20 PM

Originally Posted by Palooka

Gah, you are going to make me break down quotes. lol

Socialism(why you want to bring in communist, I will never know) makes makes all people created equal. No matter how much money is attached to their name.

Actually, if you want to argue political economic systems, socialism makes those who produce more servants to those who produce less. BUT - that's a discussion for iQuarrel.com not here.

And I brought in communism because it differs from socialism.

Sure like the gov't and the CEo's?

No, I mean it's hard to have any economy that runs on pure barter. If you had a pure barter system and worked as a secretary for a lawyer, the lawyer could only pay you with legal services. How would you trade legal services to the local grocer?

just pure luck?

Nope.

**Palooka** · 09-17-2009, 02:34 PM

Originally Posted by Greebs

Actually, if you want to argue political economic systems, socialism makes those who produce more servants to those who produce less.

And I brought in communism because it differs from socialism.

Most people in Europe would not agree. You can't bring in communism and compare to Socialism. This topic I find can be a debate, so don't shut my opinions down because of a subject that you brought up.

No, I mean it's hard to have any economy that runs on pure barter. If you had a pure barter system and worked as a secretary for a lawyer, the lawyer could only pay you with legal services. How would you trade legal services to the local grocer?

I do the barter system from time to time.

nope

Then spare me and get to the chase...

**ri*smom** · 09-17-2009, 02:39 PM

Originally Posted by Greebo

In a way, indirectly, I suppose demand does cause it's creation, but there is a very specific tool that causes money to be created. Before the tool is used, the money doesn't exist, after the tool is used, it does.

The tool is a concept that forms the entire foundation for our currency system.

What is the tool?

Hmmm . . . is the tool value? Before value is used, the money doesnt' exist, after value is used, it does.

Value is then the concept that forms the entire foundation for our currency system.

That is my best guess as to "what" (concept/tool) fits the blanks in the above statements. My next best guess would be greed.