Would it not be "personally-attacking-anyone-whose-actual-points-you-are-unable-to-invalidate"? There indeed should be a single word for that since it is one of the oldest behaviors, both on- and offline.

Just remembering my point at /index.php?topic=144650.msg2860192#msg2860192, the mistaking of money for wealth (for assets) and of debt for money are the same, and both result from representational monetary identity.

So let us talk straight:

1) If money cannot be a liability, then it cannot be an asset: my bank money can only be an asset to me by becoming a liability to the bank, and it can only be an asset to the bank by becoming a liability to borrowers. This is no "accounting trick": money can only be an asset if mistaken by a liability, as which alone banks can duplicate it in the borrower's account - the original form of this mistake is what I call representational monetary identity (http://omniequivalence.com/representational-monetary-identity/).

2) Wealth is not a claim on labor, despite having a monetary value and being a product of labor. Instead, money (not wealth) is a claim on wealth (not on labor). Wealth is in itself neither money nor labor: it is rather all things we produce because of their utility, without which they could have no monetary value (a piece of wealth taken in its monetary value is, precisely, an asset). The true meaning of "assets" is the one you put between quotes:


While its false meaning is the one you leave unquoted:


Instead of denouncing banks, you are just buying into the very confusion that allows them to make money: the mistaking of money for wealth (for assets).

We must consider public versus private money to learn how money can either be privately public, as in bank notes, or just publicly private, as in Bitcoin.


Publicly Private Money

In my pocket, I have an old leather wallet. It contains enough bank notes to buy a brand new wallet of a better model I saw in a magazine. This buying power exclusively belongs to me: I am the only one who can use those notes to buy anything. Likewise, if I handle them to another person, then instead of me, that person alone can use them to buy anything.

Still, although handling my bank notes to others can always transfer them their control, it will never transfer them their property: the notes themselves do not exclusively belong to me. For example, I have no right to destroy them: they are public. What exclusively belongs to me or to whoever else controls any such notes is rather their buying power, which hence must be private.

Indeed, if my bank notes were themselves exclusively mine, then I could transfer their control by selling them to others. However, this at least temporarily would prevent those notes from having any actual buying power. Then, by calling such a lost buying power monetary value, and whatever still has it its representation, we can conclude:

1. Monetary value must be private.

2. Its representation must be public.


Privately Public Money

Then, mistaking a representation of money for its represented monetary value makes that representation privately public. So any control of such a representational monetary value,¹ whether centralized or decentralized, must also be privately public.

No commodity money can inherently distinguish between itself and its represented monetary value. Hence, all commodity money must be privately public. With directly monetary commodities (like sheer monetary gold), private control of public monetary representations is individual, or decentralized. However, with proxy representations of commodity money (like receipts for deposited gold), private control of public money becomes institutional, or centralized. Hence the privately public nature of central banks: any monetary authority must be as privately public as the monetary representations it depends on controlling. While conversely, any monetary representation controlled by a central authority must be privately public.


Purely Public Monetary Privacy

The Bitcoin monetary system represents any monetary value as a private key, then metarepresents it as the corresponding public key. Never before a monetary representation was inherently distinct from its represented monetary value: for the first time in monetary history, controlling a private monetary value does not require any control of its public representation. With Bitcoin, a public object can represent a private monetary value without ever becoming itself private -- which makes its private control by any central monetary authority not only unnecessary, but also impossible.


Privacy Versus Anonymity

Monetary privacy means monetary control exclusiveness: the exclusive control of a monetary value and possibly of its public representation. It does not necessarily mean anonymity. Anonymous monetary control remains different from exclusive monetary control, even if helping protect it. This way, we can have monetary privacy without having monetary anonymity, despite not conversely.

---

1.  See http://omniequivalence.com/representational-monetary-identity/.

The reason why fractional-reserve banking works is not because commercial banks "pretend" still to have the money they already loaned. It works because the representation of that money by different bank accounts remains mistaken for the same deposit money, which hence replicates itself among its different representations by those different bank accounts (or notes, checks, etc), in what I call a representational monetary identity.

Bitcoin prevents that by inherently distinguishing money (a private key) from its representation (a public key).


Fractional-reserve banking predates central banking: it is not necessarily "backed by central banks," although with central banks it will take longer to collapse.


A central bank that does not create money as a public debt is not a central bank.

You are a bit confused: I gave you Bitcoin as an example precisely of money that is not debt since you asked me for such an example. Yet even if I didn't, you have just conceded that money can be something other than debt, which is good enough.

To find money not created by banks you just have to:

1) Remember that banks have not always existed and that money was once gold and silver (not to mention salt, cattle, etc).

2) Notice the forum you are in, which is about Bitcoin, a form of money created by a peer-to-peer network, rather than by banks.

No that difficult, is it?

Why would that be? Why would it make no sense to trade a pair of shoes for a knife and make up for the difference in price with a gram of gold?


Not in my example, in which we exchange only a pair of shoes, a knife, and a gram of gold.


Are you saying my pair of shoes is a debt claim? Or perhaps it is the knife?


Absolutely correct, provided you are talking about money as created by commercial or central banks, and not about money in general.

In this thread, these two opposite views of money showed up:

1) Money can only be an IOU.

2) Money cannot be an IOU.

These are precisely the two possible views of the phenomenon of money becoming debt, taken unilaterally. When a commercial bank makes a loan:

1) The new money created must be different from the money from which it borrowed so it can still belong to its original depositor. By taking this view unilaterally, we conclude: money can only be that loan itself.

2) The new money created must be identical to the money from which it borrowed so it can remain a loan from that original money. By taking this view unilaterally, we conclude: money cannot be that loan itself.

Although both views have a legitimate motivation, they are both wrong:

1) Money can be an IOU as the continuous expansion of our money supply as a debt overwhelmingly shows. The resulting debt-money supply is as much real as the resulting monetary crisis.

2) Money must not be and in itself is not an IOU, as this example shows:

If I have an ounce of gold and a pair of shoes worth two ounces of gold and you have two ounces of gold and a knife worth an ounce of gold, I can give you my pair of shoes while you give me an ounce of gold and your knife. In the end, we still own three ounces of gold each, both in monetary (golden) and commodity form, and nobody owes anybody anything.

I propose an explanation of how can money be an IOU without being in itself an IOU at http://omniequivalence.com/fractional-reserve-banking/.

Sorry, I forgot you were just talking about the weather.

So you think you can have fractional-reserve banking without ever having central banking, right? And that you can have central-banking without sooner or later having the deregulation of banking and the merge between commercial and investment banks, right? And that you can have that merge without the explosion of derivatives, right?

Well, good luck with your dam.

What about both? What about something that is of first rank, importance, or value because it is first in order of time or development, or primitive?

By making these two senses exclusive you are condemning yourself to fight just imminent problems and only recognize immediate causes.


So according to your logic, even if floods are caused by rain, and rain is caused by evaporation, floods are not caused by evaporation. Amazing.


Sorry to interrupt your worrying about that giant Tsunami with my little-quibble monetary theory, but I really don't see how a decent monetary theory can be of no use in avoiding future Tsunamis (the present giant wave is not the first, as you probably know). As for the present monetary Tsunami, do you really think you can avoid it? (And if not, then who's efforts are misplaced?)

So why don't you stop worrying for a moment and try to understand things for a change?

Today, most money is debt, and the primary mechanism for debt becoming money (of which the first "derivative" is called central banking) is this: when a commercial bank makes a loan, it creates new money that, if deposited into another bank account in the same or any other bank, enables the latter bank to loan it again, creating even more money. This continuous creation of debt expands the money supply that we use to buy cars, houses, and cell phones, creating inflation---so this credit money is as much an illusion as the cars, houses, and cell phones it buys, or as the inflation it causes. As some of us know, if everyone were to withdrawal their money from all banks, there would be no money left for most of us to withdrawal. However, this is no longer because there are only 10% reserves, but rather because now less than half of that percentage exists in physical form---a percentage that continues to shrink.

The crux of all this is that each loan replicates the money from which it borrows, so the same loan must be:

• The money from which it borrows to still be a loan from it.
• Brand new money for the money from which it borrows to still belong to its original depositor.

What we must explain is: what makes this ambiguity possible? I propose an answer to this question at http://omniequivalence.com/fractional-reserve-banking/ and http://omniequivalence.com/representational-monetary-identity/.

The primary problem is not necessarily the biggest in size.


So all this has nothing to do with money, right?


Don't get so impressed with these quantities: if you do not understand what money is, then it will make little difference whether you can figure out what a trillion is (I confess I cannot).


Likewise, derivatives are not called this way for no reason: they derive from something. So unless you can figure out what they derive from, which is the process of debt becoming money, you will not have found the "primary problem" (it is a bit funny to look for something primary in something primarily characterized as derivative, don't you think?).

Let me just quote myself a few posts ago (https://bitcointalk.org/index.php?topic=144650.msg1538255#msg1538255) in answering to hazek:


As you can see, I haven't missed that money "today is almost universally credit money." It is you that are missing that money being debt today is no proof that it has always been or must always be debt (what about Bitcoin?).


What you are describing is the birth of fractional-reserve banking. Try to conceive of money in a different monetary system. This is not as hard as you think: money is much older than fractional-reserve banking.


Again, I am not missing that today's money is debt: it is you that insist in putting all money in a fractional-reserve banking context (what about Bitcoin?).

Try to frame my example with sheer gold acting as money, and you will see there is no longer any place for debt left in it:

If I have an ounce of gold and a pair of shoes worth two ounces of gold and you have two ounces of gold and a knife worth an ounce of gold, I can give you my pair of shoes while you give me an ounce of gold and your knife. In the end, we still own three ounces of gold each, both in monetary (golden) and commodity form, and nobody owes anybody anything.

So the money for us must represent a diamond. However, a certain amount of money does not represent a diamond: it represents the exchange value not only of this diamond, but of anything having the same exchange value. If money meant "I owe you a diamond," then it could not buy anything other than a diamond, which means it could not buy anything---since by definition money does not care what it buys, provided it has the same exchange value it has.


We want money because we want to be able to buy things, mostly not yet knowing which ones. Money does not represent what we want to buy: it rather represents its exchange value.

No amount of money makes any decision about what we can buy with it: that is precisely the point of money: the capacity to represent exchange value, giving us absolute freedom about its concrete form.

If I have U$ 100,00 and a pair of shoes worth U$ 200,00 and you have U$ 200,00 and a knife worth U$ 100,00, I can give you my pair of shoes while you give me U$ 100,00 and your knife. In the end, we still own U$ 300,00 each, both in monetary and commodity form, and nobody owes anybody anything.


Here you are close to defining money, except for the word "abstract": money is a generic exchange value denominated in something concrete.


A monetary debt consists in owing not an object, but rather its exchange value. If I owe you U$ 100,00, I can pay you with anything worth U$ 100,00 (although I suspect you will prefer money so you don't have to sell whatever I give you to get what you want). So any monetary debt requires an independent representation of exchange value. If a monetary debt were itself the owed exchange value, then it would become an infinite regression of the form: someone owes the circumstance of someone owing the circumstance of someone owing the circumstance... to someone else.

What would be that something you will give me "at a later date"? That something is the money. Otherwise, you would have to have a different "tradable representation of debt" for each transaction, each one referencing the particular commodities involved in its represented transaction.

Money is not an IOU: it is what IOU.

Then stop wasting your time explaning me something I already know.


Don't you know that almost all of our society's money is debt? Since you are so fond of the facts, I expected you to know this one. In our society, debt and money are the same. So far, there is no escape from that, which is precisely what Bitcoin is all about.


No one reads the fine print. This is another fact I expected you to know---the banks certainly know it.

I went to my bank yesterday and made a withdrawal of almost all my balance. Was that an illusion, period?

(Of course I know the bank is loaning my money and eventually I will be unable to withdraw it. However, this has not happened so far.)


If the bank loaned my money, then it forgot to subtract any such loan from my balance. If my money has indeed "moved into someone else's pocket," then the bank, for not letting me know about it by subtracting the moved money from my account balance, is defrauding me---which you said not long ago it is not doing, remember?

So it is not true all I have is an IOU. What I have is an IOU that I must take as money (since this is what my account balance is telling me).


It is not my choice to treat this IOU as money: it is the only money around. If I don't treat it as money, then I will have no money to pay for things (at least while Bitcoin does not go mainstream).


What you are failing to understand is that even if I am eventually unable to withdraw my money, I am still entitled to do so, which is precisely why fractional-reserve banking is a flawed monetary system.


One thing is my responsibility for the monetary system society adopts. In this sense, I have the responsibility to fight for a better monetary system, for me and for all. However, in the current monetary system I am not responsible for my bank's loans. This is not a matter of considering myself responsible or not: this is a formal contract between me and my bank. Whatever that contract says, my money remains mine and I can always withdraw it.

Without money, I cannot owe you anything: the object of debt is exchange value, of which the only expression is money. That is why money cannot itself be debt, except as a result of some confusion, which is precisely what happens in today's monetary system.

My U$ 1.000,00 can rather belong to the bank's excess reserves. Or, I can succeed in withdrawing them if I am quicker than you and benefit from the bank's 10% reserves. And even if there are no excess reserves and I am not quick enough so the bank cannot give me my money, my U$ 1.000,00 still belong to me since it was the bank that loaned them, not me: I am not responsible for what my bank does, am I? The point is that the money created by loans must be money just as much as the money originally deposited (and in practice indistinguishable from it), otherwise the system cannot work. If you say deposit money is an illusion, then you are saying that loaned money is an illusion, and conversely.