His channel is growing fast, so KZfaq agrees

Btw, if you were trying to convey an explanation slightly different than that of the 3 money aggregates, feel free to jump to rectify my understanding of it :)

So what he explains as the Monetary core is M0, M1 is the periphery, and M2 the crust? What is M3?

@@customersupport9055 M money is part of the core. M3 tries but fails to represent the periphery.

@@customersupport9055 M3 is supercurrency or supermoney (i.e. shares of equity that grows in value) and you can convert some of your shares into fiat currency and move to M2 (savings) and then to M1 (checking) in order to spend your supercurrency.

Very happy to hear that!!!

Much appreciated!!

And letting gold mine owners control the rate the economy can grow is nuts

@@annoloki That is a severe misunderstanding. The rate of of growth of money supply doesn't "control" the growth rate of the economy. Even the extent to which it influences the growth of output is subject to considerable dispute.

Gold-standard cults and keyboard warriors like to imagine that banks under silver and gold standards won't manipulate the currency when the reality is the opposite.

In my completely probably ignorant opinion, I think we still very much have commodity based currency, except that it is not just "gold", but many complex layers, such as workers skills, military might, population, accessable resources. I mean even if we completely wipe all the current financial system the bodies that have overall decent resources, good organization, skilled workers, military will come on top. I guess it's more multiple commodities + social capita + how well you can organize it.

Thanks!!

Thanks! And interesting... this book is now on my radar. I haven't read it yet. I will do some more crypto as money videos in the near future for sure :) (maybe later also about that book)

No; you can have parallel routes in and out of each layer. During the GFC, the majority of QE was done via the creation of Bank Reserves, a credit in each regulated bank's account at the Central Bank, which could not be lent or traded by the Bank, but could improve their liquidity ratios. The next tranche of QE distributed was cash transfers from the core firstly to workers as lockdown payments to subsidise lost wages and to pay unemployment benefits to those laid off, then secondly to economically sensitive businesses, often as grants or loans, then finally payments to public services to cope with their increased demands. It doesn't matter how the money is delivered, but where the money originates from. When you go to an atm, and withdraw some cash, that money is still core money in the form of cash from a peripheral bank's atm. But say, you use your credit card to buy something. That money is peripheral money going to the retailer. But what about cash advances on your credit card? Well, banks borrow money to lend out to consumers using credit cards. When you borrow that cash, that loan itself becomes an asset to the Bank, which they can hold on until you repay the cash advance, or sell the loan, or lend it out for a fee. That is therefore peripheral money as credit. Grey or black money is still peripheral money. For example, the Eurodollar capital market comprises of private banks outside the USA making loans collaterialised by US denominated assets, that are denominated in USD. These are now USD assets that are destroyed when the loan is repaid, but which sold on too. Moreover the stream of repayments can be invested in other USD markets. VISA is run by the cartel of private banks from a tax Haven outside regulatory control from sovereign central banks. They provide all the money for credit card use, and split the profits with domestic banks who sell their products. All those USD are black or grey to sovereign nations, as when the measure the money supply, they do not count those USD created by offshore banks making USD loans in the periphery. So Eurodollar markets provide black money that everyone with a credit card uses. All within the periphery.

@@BigHenFor Thanks for your reaction & view on this question. I agree with some parts of the answer, but I am not sure if I follow you everywhere in this answer here. As I understand the video, the different parts of the monetary system are different not only in the source of their creation but also in the environment and type of spending that they allow. The core has mainly money created by central banks around a nucleus of gold, and is useful in most situations, but not so much for very large transactions and in establishments afraid of theft. The periphery money is mainly created by banks by the action of creating loans (which become assets on their balance sheets until repayment) and maybe some other vehicles. This money is useful too for many payments but less for e.g. very local shops or sectors critical of digitization or money-tracing (including clandestine ones). The crust contains all kinds of money-like things that also can be created by non-bank entities, and have typically only value/trust in more limited settings or time frames, like e.g. tokens at a festival, supermarket vouchers, cryptocurrencies, money market funds, … My question here is really whether grey zones exist or these are firmly distinct categories, and whether a change of outside conditions can change the allocation of one type of money to a different category, because its usefulness changes. As you point out, black and grey money could belong to any of the different layers, based on their original creation, but maybe never belong to anything else that the crust considering their much more limited possibility for use because of the illegal origin or tax dodging, respectively. Moreover, does cold card physical cash belong in the core in a city where you can e.g. only pay with physical cash in certain neighbourhoods, but not in most establishments or for most transactions? Food for thought, cheers!

Thank you very much!

Thanks!

Thanks!!

You are correct. Referring to brokerage accounts as "the money market" was an unfortunate choice of words, since that the term already has an established meaning in finance and economics, which has nothing to do with stocks. (As you say, it refers to debt with a maturity of less than one year, though typically much shorter than this.) That said, "the money market" is a term that in everyday language is also used to refer to financial dealings in general, including stocks and longer term debt, so Joeri wasn't technically "wrong" to use it.

Hey Bjørn, here are some of my sources: www.levyinstitute.org/publications/the-hierarchy-of-money#:~:text=Minsky%27s%20insights%20in%20order%20to,acceptability%22%20is%20its%20important%20feature

www.researchgate.net/publication/5208277_The_Role_of_the_State_and_the_Hierarchy_of_Money

For the last one see my previous comment. Yes you can use this framework to re-think financial stability. Viewed through this lense most crises can be seen as the point at which a lower layer becomes too big for the upper layer. For example if the upper layer is gold (in a gold standard) and the layer below it is money convertible in gold. The crisis happens when everyone tries to convert that money too gold. Similarly, a financial crash happens when everyone tries to convert financial assets into "safe" bank deposits.

@@MoneyMacro Thank you!

@@MoneyMacro Hello again, Joeri. I have textbooks in macroeconomics, both dedicated to orthodox and heterodox economics. I find it strange that none of my textbooks describes money as a hierarchy - not even in my heterodox textbook. Do you have any thoughts about why this theory isn't a mainstream one?

Thanks!

Reserves are bank accounts that only banks can hold. Banks can exchange these for cash and pay each other. So, you need reserves in case of a bank run, either SVB style when money is transferred to other banks, or old-school bank run when they need physical cash.

@@MoneyMacro thank you for explaining, but I still don't know one thing, why do you need reserves to transfer money to other bank's bank accounts? Do they have a different kind of digital money or something like that?

@@liquidificadoroficial3975 your money is a liability of a bank. But other banks don't want too much of a liability of other banks. They prefer a liability of the central bank. So, while we use bank money to pay each other (for the most part) banks use central bank money to pay each other.

@@MoneyMacro got it, thank you!

Thank you!!

isn't it is in effect still a promise to pay central bank money even if most people choose not do act on that promise?

@@MoneyMacro Not really. Is there a legal contract saying that the bank promises to pay the depositor in central bank money? At least here in New Zealand there is no such obligation. "The actual form of payment - whether it is by legal tender or some other method - is determined by the contractual context. A contractual provision may specify the form of payment as something other than legal tender. For example, it may specify that payment be made electronically or by cheque, in which case the debtor has no right to insist on payment in legal tender. With small sums and routine transactions, contracts are frequently silent on this matter and payment in cash is not considered unreasonable. With large sums, where the contract is unspecific as to the form of payment, the courts are likely to conclude that payment by legal tender is, in the words of one author ‘unthinkable and cannot possibly be within the contemplation of the parties’.3 This is because the courts will take into account the commercial context of the transaction and the practical difficulties faced by the creditor who must count out very large sums of cash." tinyurl.com/dccnaark

to understand how big part of human life is social, and curb that material side negative effects, while fulfilling people's needs for that social needs and keeping connection with community, friends, family and so on. Xmas cards are good example, it is tradition, helping us to keep connected, coz otherwise it is very hard without "rhythm of life". But this needs to be smartly "regulated" so that businesses cant drive people to send 100 cards instead of 1, coz that would again revert back to infinite growth mindset and cause bubbles in economy. After bare necessities, people like me crave social life, and if feel helpless, we buy things. In urban cities this may be big problem, as it is more synthetic environment without natural communities.

Carbon taxes are how economists recommend emissions be accounted for. Even if you just return the money collected back to tge people, the cost of the carbon will then be included in prices and thus every decision in the economy will take its carbon (or ghg-equivalent) impact into account. Environmental depletion is an externality which can usually be solved with pigouvian taxes.

What is this so-called "real world" that economic activity is alleged untethered from? It seems to me that I could just as well describe this imagined "real world" you apparently place such high value on as floating on collective faith (ie on shared imaginings), untethered from economic concerns. In that case, we'd be talking completely past each other, which helps no one, but it does enable me point out you're asking others to privilege your value system over their own (or to speak for myself, over MY own) without any evidently good reason.

The idea behind the hierarchy of money is indeed that it only shows itself in times of crisis. That is when the prices of the various types of money might "break parity". So in normal times the hierarchy is invisible. But, that doesn't mean it is not there. It's useful to think about it like this so that you are better prepared for a crisis.

@@MoneyMacro i appreciate your reply but lets get down to single specifics. First- what do reserves do in the economies of countries like Canada or Australia which has not had a reserve requirement for 40 years? My understanding is It can't do anything because it does Not exist at all.

@@Rob-fx2dw I agree that reserve requirements are not very relevant. See my video on the money multiplier being a myth. But, that doesn't mean that reserves themselves are not relevant. Especially not in a crisis. Check out some of my other videos on central banking and credit money. The hierarchy of money idea is not at odds with these ideas

@@MoneyMacro Thanks for replying but your other video is wrong itself. I have given the explanation of why it is wrong and provided the evidence that proves it is wrong. Your explanation is essentially wrong because I believe you don't seem to understand that all of the sovereign designated money today is fiat credit money no matter what form it is in being digital, paper, coin, or whatever. It is ALL fiat credit money. So the US dollar is fiat credit money and the Euro is fiat credit money no mater who creates it be it a private bank or a reserve bank. Being credit is an essential par of understanding what it is and credit can be created by anyone who has the ability to be risk assessed as credit worthy that satisfies the banks who create new money. That applies to central reserve banks who lend exclusively to government or sometimes to private banks. What essentially restricts lending is the interest rate which forces people or organizations on fixed incomes to assess again whether they can make repayments. .

@@MoneyMacro G'day again, You can see Rob on the Deficit Owls Channel. He is well know over many years to never ever change his mind or even understanding something he disagrees with before criticising it. Or being corrected on anything. And then even deleting his comments rather than admit being mistaken about anything, or admit his commitment based on ideology, even when given lots of time & God-like patience by the Channel Creator. Most ppl then soon realize he doesn't ever change his mind and is not worth the time. I also had spoken to him & listened seriously to him at the very start too, before I realized.