"Why is it necessary to create new money? Ans.For increases in population and productivity."

Why do increases in population and productivity make it necessary to create new money?

Money is the *medium* of exchange. It establishes the exchange *ratio* of goods being exchanged. This means that it's the *relative*, not the *absolute* amount of money that's important. There is always enough of the money stuff to perform the function of money.

Similarly, to take my example, suppose a farmer figures out how to plough his field more economically, and this gives rise to an increase in his productivity. When he goes to sell his crop, why does his increased productivity give rise to a need for the creation of extra money?

If the derivatives had no value, why did people buy them?

You will get no argument from me about the evils of the Federal Reserve system.

But under your proposal, will not the central bank have the power to inflate the money supply by lowering interest rates below the rate they would be on the unhampered market?
My objections are
a) you haven't shown why it is necessary or desirable to increase the supply of money or credit in line with the general increase in productivity
b) you still haven't justified inflation taking people's earnings away whether they are forced to pay private banks, or the governmen
c) the power to inflate the currency has the effect of distorting the entire production structure, thus leading to economic crises and social injustice - any such monopoly should be abolished
d) what makes you think the power, once granted, would be used as you would like it to be? What would stop the central bank from doing what it wants, especially if it were independent of government, as both the Fed and the RBA are?

The idea that we would pay less tax if we weren't paying the debt to private banks shows a touching naivety about government.

Peter have you noticed the Private US Federal Resrve has created $ trillions and loaned it out all around the planet.That money should have went into the real US economy.Instead much of went into the derivative market.The derivative market is really a casino that expands on its'own expectation.They make bets on shares and markets falling .They bundle up bad depts like mortgages and sell them off to your super funds as prime safe investments.It was these same credit agencies that are now downgrading institutions/countries to create market volitility for their profit.The derivative market is said to be worth $ 150 trillion and the assets don't exist to equal its value.
Those who know how the play the game make $ billions.No one knows how they are tied up in sound investments.Taht is why we need a Glass Stegal Act to triage the derivatives.

Max Keiser has revealed that the banks in France are not disclosing their exposure them.Our banks are said to have 20% exposure.They have been bailed out by the Federal Res.Our RBA should have performed that role.

Yes money is the medium of exchange but the new money represents the increases in our productivty.Should your productivity Peter be expressed as debt by OS private banks or as a tax credit by our sovereign Govts? The more grwoth we have the more debt we incur because our growth gets expressed as debt.China provides 80% of its' new money debt free or as a tax credit or as infrastructure.It continues to grow at 9% while we languish in debt.

The entire planet is in an absolute mess because we let private central banks to create money from nothing to equal inflation + increases in our productivity.You cannot escape that reality Peter.

I agree with you as to the evils of the status quo of money, credit and banking,- I've done as much as anyone to criticise it in here. (In fact I've done more than you to criticise it, because I condemn the root of the evil, which you don't, namely the license to print money itself).

However you're not explaining how it would be any better if
a) government were directly creating the trillions itself, or
b) what would stop it from handing it out as they see fit,
rather than if government were just licensing the Fed to do it, as now.

"Should your productivity Peter be expressed as debt by OS private banks or as a tax credit by our sovereign Govts?"

Neither! Why should it be expressed as either? The idea that it must be one or the other only comes from the belief that government must have a monopoly power of the money supply. Why? It can't be because it's so extraordinarily moral, or it wouldn't have licensed the Fed to do what it did. It can't be because it's so extraordinarily good at managing the macro-economy, because it's been a complete disaster.

So your argument is stuck in a fork. If you say we need the government to have a monopoly control of the money supply because it's so selfless and wise and good at what it's doing,
a) not even you agree with that
b) it's exercising its presumptive wisdom already by licensing the Fed's existence and operations.

But if you say we don't need the government to have a monopoly control of the money supply, then there's no reason why you should be proposing a central bank with a license to print money.

So let's strike to the root. Why do you think money needs to be created in line with population or productivity? What would happen if it wasn't? - (and please don't say 'There wouldn't be enough money'!)

What would it take for you to change your mind on that point?

The Bankers Manifesto of 1892
"We (the bankers) must proceed with caution
and guard every move made,

http://whatreallyhappened.com/WRHARTICLES/wtc7.html

the actual sound track
http://whatreallyhappened.com/IMAGES/WTC7explosionfilter.mp3

for the lower order of people
are already showing signs of restless commotion.
http://whatreallyhappened.com/

Prudence will therefore show a policy
of apparently yielding to the popular will

http://www.mybudget360.com/new-gilded-age-massive-market-volatility-sign-of-financial-weak-economy-stock-market-volatility-surges-2008-onward/

http://knucklz.com/2011/08/13/criminalizing-poverty-during-economic-crisis-new-laws-crack-down-on-americas-poor-homeless.aspx
http://dailybail.com/home/dennis-kucinich-its-a-fake-crisis-social-security-did-not-cr.html
http://mycatbirdseat.com/2011/08/81-house-members-enjoy-hiatus-in-israel/
http://desertpeace.wordpress.com/2011/08/14/misleading-news-reports-about-gaza/
http://www.washingtonpost.com/wp-dyn/content/article/2007/10/15/AR2007101501857.html

until our plans are so far consummated
that we can declare our designs without fear of any organized resistance.
http://theintelhub.com/2011/08/14/liberty-must-survive-at-all-cost/
http://www.zerohedge.com/news/media-admits-ignoring-ron-paul

we must take immediate steps
to control these organizations in our interest or disrupt them

http://video.google.com/videoplay?docid=4747043279458267117

http://dailybail.com/home/marcy-kaptur-wall-street-greed-and-endless-wars-are-to-blame.html
http://dailybail.com/home/wake-up-america-the-real-us-budget-problem-defense-war-spend.html

I have been reading this discussion between Arjay and Peter Hume with
a mixture of confusion and amusement.
My question is exactly how does money come into existance ?
Is it when the RBA generates pixel money and passes it to a bank ?
Does that bank by receiving that money accept it as a loan from the
RBA and pay the RBA interest ?
If so does the bank operate as an agent for the RBA by lending out
that money to customers.

If that is the way it works, then the government is on a good thing.
However the relationship to GDP must be very tenuous.
GDP is the sum of all transactions, both buyer and seller, so has
little relationship to productivity except perhaps to be the result
of some sort of multiplier of produced goods value.

The extra money needed because of growth will be a fraction of GDP.
Anyway as we will soon have zero growth that will no longer a factor.
Will then the RBA start buying back money and burning it ?
If not all that extra money sloshing about will cause inflation.

I think many are as confused by the system as I am.
How will Arjay's proposal handle contraction ?

BTW loan is a nown and the verb is lend !

bazz quote..""My question is
exactly how does money come into existance?""

if you google 'the secret bankers manual PDF'
all will be explained

""Is it when the RBA generates pixel money""
no..[thats the clever trick
see the fed controls the note printing branch
so it rents the notes to the bank

see..*who signs the 'money'
money is a check[bank-note]

and who controls the check
controls the value of fiat/paper
they charge intrest as much as they chose
they issue too much paper/credit..that deflates the value of the note

basocly bankers collect the notes
pay the rent by returning the notes back to the fed
who burns them

if the banks run out
they rent more...[all notes 'deposited with the fed allows the bankls a credit line [alows then to write checks too..cause who-ever gets the check..must send it back to the fed...for the credit to be honoured]

its a clever trick really
think of it as your hair only is legal tender
all debts must be paid in your hair..my hair has no value

so you hold the franchise..for your hair
just like other bankers hold their own franchise over their own fed reserves./mints/treasuries..etc

""and passes it to a bank?""

often via a house of settlements
also owned by the bankers

""Does that bank by receiving that money
accept it as a loan from the
RBA and pay the RBA interest?""

yes
but think of it like your cash holds a share in it
you put money [their fiat paper'..into the bank
and earn [have acces to 98% more of it]
but to earn more of it someone MUST lend it..[and pay the rent on it]

and only they control who gets any of it
[read the creature from jeckle island]

""If so does the bank operate
as an agent for the RBA by lending out
that money to customers.""

yes
also a few are allowed to sit on the board
[but not told all the secrets]

""the relationship to GDP must be very tenuous.""

yes..its as important*
as YOU proving..*you got a job

no job..[in-come!]..
no loan