Does the seigniorage plot, as told by some exponents of the so-called counter-information, really exist?

It is a question I have recently asked myself, after learning that public information meetings take place, which deal with economic issues but still too often with conspiracy emphasis.
Let's try to explain how seigniorage really works in two separate articles.

In the first part we will address the issue of seigniorage seen from the point of view of communication. In the second part we will see what seigniorage consists of from a technical point of view.

The conspiracy trap set in front of unprepared people and looking for serious answers

These meetings are a strong catalyst for people looking for concrete answers to questions such as: are my savings safe? Will there be a withdrawal on current accounts? What future awaits me in the coming years?
It is unfortunate that these questions are often answered by a series of conspiracy theories that carry with them the hope of instilling some sane knowledge in people.

Some of these conspiracy theorists can be defined as monetarists, but that does not mean that monetarists are conspiracy theorists. They are the ones we talk about in this article.

An old video has come to urge me to tackle this issue, via social media, re-emerged from the distant past, thanks to a person who submitted it to me in search of explanations.

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What do you need to know in order not to take the bait?

In order not to fall into the trap, you need to know a few things even at a basic level, such as:

• what is money;
• who and how creates it;
• basic concepts of a bank's balance sheet debit / credit, credits / debts, assets / liabilities;
• what is a debt.

It takes very little and they are all things that those who have read the best seller, The Easy Explained Economy has learned with great ease.

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Anyone who tries to understand if a video circulating on the net is true or lies is definitely a minority slice of the population and I was happy to explain the pitfalls of that video in a few points.

In fact these videos by themselves seem absolutely logical and coherent. If you don't know the basics of economics.
Some monetarists are convinced that the seigniorage plot is based on the money issue scam and explain it to us that it seems true.

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Monetarists and the video on money

The video in question is titled: El concursante, I think it is very famous.
At least the crucial scene is; the one that would explain seigniorage according to the conspiracists.
Here she is:

The key points of this video

To understand where the narrative deception lies, let's briefly summarize the main points:

1. In a hypothetical world, the bank owns the only 100 gold coins in existence and lends them to 10 customers at an annual interest rate of 10%.
2. The 10 customers each receive 10 coins and at the end of the first year they must return 1 coin to the bank.
3. By doing so, after 10 years, all 10 customers will have returned all 10 coins received on loan which, however, are equal to interest only.
4. How will customers return the initial capital if they have had to pay it back in the previous 10 years in the form of interest, since there is no other gold in circulation?
5. But of course by giving all their possessions: house, land, car, etc. that is the correspondence of all  those awards that the contestant has won in the TV quiz.

What are the mistakes in this film?

El concursante is certainly a well-packaged film. This makes it very easy to fall into the trap, as it gives authority to completely wrong concepts.

But the film makes a whole series of omissions and errors that already with a minimum of logic begin to waver, we see the first that come to mind without thinking too much:

1. In the film, the coin is linked to gold, which is why it is scarce. Modern money has not been tied to gold for about 80 years.
2. Central banks create all the money they want, at no cost and without difficulty. The limit to the issue of the coin is given by the objectives to be achieved and the problems that any excesses can cause to occur.
3. Therefore, the bank's 10 customers will have no problem finding that 10% necessary to repay the interest, if the central bank has put the necessary money into circulation.
4. The problem, if anything, is the difficulty in finding them because the resources are badly distributed.
5. Loans stand still; that is, they do not produce investments and therefore do not generate a return; a profit.

This is therefore equivalent to the condition of those who go into debt to buy discretionary, superfluous and unproductive goods, such as: televisions, cars, holidays, appliances, video games, subscriptions to TV and television series and so on. In this situation it is obvious that whoever gets into debt without being able to afford it will have no way to pay off debts. It also seems normal and sacrosanct to me.

The film forgets to explain that  if I buy assets with the loans, once the loans are repaid, those assets will remain. In fact, the concept is simple: I ask for a loan to buy something. If I have to take it out on someone because I got into debt, it is not the bank, but that good or service that, without a loan, I would not have been able to afford.

What's the real trick?

What that film should have explained is that if I invest the money that was lent to me well, at the end of the loan, in addition to being able to repay it, I will have created greater wealth for myself and for those who work with me.

This way of doing is what we know today to be productive spending .

The proof that the film tells a lie lies in inflation. In fact, in a world like the one described in that scene, inhalation simply cannot exist, except in the case of cataclysms, on the supply side.

The film El concursante is an example of false information.

The apparent logic and linearity behind the story very easily misleads the less attentive or informed public.
Even those who actually knew that the currency is no longer tied to gold, may change their mind or think they have been misinformed.

HOW DO YOU KNOW WHAT IS TRUE ABOUT SIGNORAGE?

Knowing the mechanisms through which banks grant us loans is important. The key is all here.

Nobody is saying that banks are transparent and charitable bodies, but that if there is any deception, people would do better to be assisted by an independent consultant, in understanding the contracts they are about to sign, rather than crowding the rooms that make disinformation. passed off as counter-information.

In short, bank scams are elsewhere.

In the book of Economia Spiegata Facile – best seller on Amazon and pure award-winning dissemination text for the masses – the mechanisms are explained in detail through the use of many drawings, which make even the most counter-intuitive concept self-evident.

• What is currency and what is its value based on?
• Who and how creates the money?
• How does central banks issue money?
• How do commercial banks generate bank money?
• How is public debt created?
• What do the cuts in public spending (which is often indicated by conspirators as the cause of our slavery) produce?
• What is a debt?
• Etc. etc. etc.

That part of lords who call themselves monetarists do not understand that the problem today, more than the quantity of money in circulation, is the poor distribution of resources.
By doing so, they turn people away from understanding the real rip-offs and turn them into allies of those who spread the lie that money is bad, dirty and bad and should be limited.

Blaming the banks for the bankruptcy of the company, regardless, means accusing only the lever, ignoring however the hand that acts on that lever and determines the reality in which we live.

In the second part we will address the issue of bank seigniorage from a technical and practical point of view.

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This article is intended as a pure disclosure.

The Easy Explained Economy: Although the data and contents have been screened, come from official sources, are of scientific value and come from academic studies and / or official statistics and historical archives, their presentation is deliberately concise and simplified in order to make them understandable to the general public.

This material is not a substitute for scientific reading or academic and / or higher profile study.

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The article What's true in seigniorage conspiracy theory? Part 1: the version of some monetarists. comes from ScenariEconomici.it .

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This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/monetaristi/ on Tue, 03 May 2022 07:01:54 +0000.