[CraigJPerry]

You don’t need CBDC, just the existing system today. Here in the UK something like 3% of money is available as paper cash. The rest is just a row in a database.

Assets are zero sum - if i sell you my car, i no longer have that asset. Money is not zero sum. It is created and destroyed as loans are made and repaid. Which kinda frazzles people’s minds when they hear it. I know it certainly did mine when i first learned.

https://www.federalreserve.gov/monetarypolicy/reservereq.htm

[H8crilA]

Yup, this shock comes from the wrong idea of money as some kind of a physical object that you obtain by performing work, whereas it's more of a different name for debt. It's a social construct. Also, you absolutely do not need any kind of banks for this to emerge, in fact it's pretty much inevitable unless you always barter (for other goods or so called "hard currencies" like gold) and do so immediately. Immediacy is surprisingly important too.

[teo_zero]

> Money is not zero sum. It is created and destroyed as loans are made and repaid.

I don't think this is true. Every transaction, even the ones that take place in the rows of a bank's database and not with physical money, involve an amount added to some account and an identical amount subtracted from another account. Even loans don't create money: the issuing bank have the amount subtracted from its reserves the exact moment the loan is made available to you.

The only method to create money would be writing a check with no date on it, which is illegal in many countries.

[edzillion]

What you are stating was perhaps the previous orthodoxy, but in the last few years even major institutions[1] have come to agree that banks do indeed create money when they create certain kinds of loans; the upshot of which is that 90%+ of money in circulation in western countries has been created through mortgage issuance.

[1] The Bank of England: Money creation in the modern economy https://www.bankofengland.co.uk/quarterly-bulletin/2014/q1/m...

[koliber]

You can create new money, legally.

Imagine the whole world has 1,000,000 dollars right now. This is made up of all cash.

You have 100,000 of those dollars. You decide to buy a car for $10,000 from a friend. You go look at the car, like it, and agree to buy it. You sign the necessary paperwork and you tell your friend that you will bring him the 10,000 cash tomorrow. You drive home.

You just created 10,000 out of thin air. The world right now has 1,010,000 of money. It is made up of all that cash, and the debt you owe your friend. The debt you owe your friend is an asset. If it was drawn up more formally, it can be used to buy things, similarly to how the greenbacks in your pocket buy thing.

Now you might be thinking that this money does not exist because of the offsetting liability. You are right that in a ledger it nets out to zero. However, “money” is not the net balance. Money is the cash, and unpaid loans side of the ledger.

Every dollar that exists was “loaned out” into existence by the government, banks, companies, and people. It will be destroyed the moment it gets paid back.

Don’t confuse money with net balances or with pieces of paper with green ink on them. Those are the things that we colloquially think of as money. But when you dig to really understand money, you eventually get to the fact that it’s all stacks of debt.

[kasdi]

It might be helpful to expand the example to make it even clearer.

Until you repay the debt to your friend, you can spend the 10,000, because you hold it in your pocket. But your friend can also spend the debt you own him, for example, by asking another person to get a loan on that loan.

So yeah, "free money"! Until one creditor somewhere in that long chain asks the debitor to pay up their debt...

[CraigJPerry]

>> Even loans don't create money: the issuing bank have the amount subtracted from its reserves

Not even the old system (fractional reserve) referred to in the fed link above works that way. The new system deletes what was left of fractional reserve policy.

[x-complexity]

> You don’t need CBDC, just the existing system today. Here in the UK something like 3% of money is available as paper cash. The rest is just a row in a database.

The point the GP is trying to make is that they want to further restrict the usage of cash in economic transactions, & that CBDCs further help in that regard. There's a difference between:

"3% of money is available as paper cash"

and

"Paper cash is banned under all circumstances"

[imtringued]

Assets aren't zero sum because you can produce more cars, etc.

Money is zero sum because almost all money is created through debt. Sum up all money and debt and you get roughly zero excluding central bank money and cash.

Money being backed by debt makes sense because it solves the "acceptance problem", that is, how do you make sure the money you have can actually buy things?

Of course that means there is no limit to how much money there is in the system.

[CraigJPerry]

>> Assets aren't zero sum because you can produce more cars, etc.

I’d need to exchange other tangible assets (raw materials) and labour to produce the next car, I can’t just make a car, a tangible asset, by declaring a new one exists.

I’m creating more value than the raw materials worth when i assemble them into a car - maybe the idea of value creation is what you’re digging at here and I’m misunderstanding?

In either case it’s zero sum. I have some form of asset or I don’t. The value of an asset is not the price of its raw materials, it’s whatever i can convince someone it’s worth. But valuation is nothing to do with the zero sum notion of transferring ownership of assets.

>> Money is zero sum … excluding central bank money and cash

That’s a contradiction. It’s either zero sum or it’s not.

But besides that it’s missing what zero sum means. The bank issuing a loan has provided you with value in the form of the loan funds but it hasn’t exchanged any tangible asset to provide you that money. It just created an asset from thin air (your loan is its new intangible asset). They can sell your loan to a pension fund but they they won’t own that asset anymore. You won’t have to repay 2 creditors if they sell your loan.

There’s a complication when you spend your loan with a merchant banked by another bank. Your bank will now have to transfer reserves at the central bank from their account to the merchant’s bank’s account at the central bank. If they don’t have enough reserves to cover this transfer, the central bank will create reserves and lend them it at the base rate.

>> Money being backed by debt

It’s not backed by anything, it’s just a promise

>> Of course that means there is no limit to how much money there is in the system

In theory true but in practice people will stop accepting your money if you hyperinflate it

[nordsieck]

> Money is not zero sum. It is created and destroyed as loans are made and repaid.

For some definitions of money. Definitely not true of M0.

[CraigJPerry]

Are you sure? M0 includes reserves - as in money deposited at the central bank by commercial banks. Reserves are increased by quantitative easing, the source of the additional reserves is nothing other than a decision.

[franciscop]

Assets are luckily not zero-sum, that'd be horrifying. If I write some software, nothing has "disappeared". If you copy me a movie, you still have the movie. If I make a painting of build a table, a new asset has been created.

[CraigJPerry]

You’re talking about intangible assets. For better or worse, usually it’s a licence or contract that exists to artificially limit your ability to copy. When you’ve sold your licence to use the software, the software is effectively gone. It’s not always as simple as that. E.g. my brand is an intangible asset.

>> If I make a painting

That’s just a regular asset, once it’s sold you’ll need to paint a new one.

[franciscop]

> For better or worse, usually it’s a licence or contract that exists to artificially limit your ability to copy.

I can assure you I didn't have to issue manual licenses or make manual copies for the millions of downloads that my open source software had this year. When someone downloaded it, no one found it missing from their project.

> once it’s sold you’ll need to paint a new one

Hence is not zero-sum, I can keep making them and the amount of assets keep increasing (non-zero sum). Zero-sum means that "whatever is gained by one side is lost by the other." By creating a new painting nothing is lost.

[CraigJPerry]

>> I can assure you I didn't have to issue

You did - if it was open source, you issued a copyleft licence that uses the system of copyright to disclaim your rights. It’s a licence.

Maybe you didn’t specify a licence, depending on your jurisdiction then perhaps the work is classed public domain automatically or more likely you’ve created a situation where technically your users are breaching your copyright.

>> I can keep making them

Sure, you can exchange some assets (paint, a canvas) and your labour to make a new asset (a painting).

>> By creating a new painting nothing is lost.

You’ll no longer have the paint or the canvas, you’ll have a painting. Zero sum.

[franciscop]

> You did - if it was open source, you issued a copyleft licence that uses the system of copyright to disclaim your rights. It’s a licence.

I mean I didn't manually make each license, it's COPIED without nothing being removed from me. I can copy it once or a million times, nothing is removed and value is added, hence non-zero sum.

> You’ll no longer have the paint or the canvas, you’ll have a painting. Zero sum.

No, it's not the same, a painting has more value than the paint and canvas; hence not-zero sum. It's ridiculous to claim zero sum, that'd imply we cannot advance as a species and would still be dealing with pebbles.

[CraigJPerry]

>> I mean I didn't manually

Manually or automatically issuing is insignificant. Your work was automatically copyrighted when you wrote it, if you did nothing else - such as agreeing to exchange those rights for a salary from an employer, or declaring the software as licenced under specific terms, or performing the necessary actions in your jurisdiction to enter the works into the public domain, if you did none of these, then it’s yours to claim as an asset if you want.

>> nothing is removed and value is added

No asset was removed - ownership of the copyright of the software still remains unchanged when people copied your open source software.

However, no new asset was created. They derived value from your software hopefully but they didn’t gain a new asset.

What if you licenced it under a really permissive licence like apache? It’s still the same story. someone else can create their own asset by changing your apache licenced software and distributing it as theirs. They’re in breach of that particular licence if they try to redistribute completely unchanged work under a different licence.

>> a painting has more value than the paint and canvas

You’re conflating valuation with accounting. The value of an asset is a different and often subjective concern, from the accounting of ownership of it.

A painting has more value than it’s raw materials (hopefully!), but that tells us nothing about how to account for ownership of the asset.

If i have a case of beers that i bought for $50 and i take it to the beach and sell it for $100 to a group of thirsty friends, the valuation changed but the chain of custody of the asset was zero sum all through.