Talk:Real bills doctrine

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Call for expert help[edit]

Right now the article contains a lot of material but has serious deficiencies in structure and style and no citations whatsoever. It needs a lot of TLC from people that know the subject matter and Wikipedia's style conventions well. Added templates accordingly

The article hasn't been helped by the addition of a lot of new material by an anonymous contributor who likes to use phrases such as "Whether the Austrians are right or wrong, ignoring their point of view is neither fair nor helpful in an honest endeavor to detect the truth". I'm reluctant to just revert since some of the commentary they've added to the example may have some value.Dtellett (talk) 11:57, 11 January 2012 (UTC)

Fixed it best I could[edit]

Fixed it best I could. I think it's looking good now. Needs a bit more help with wikification, though. It currently reads like an old ecomomics textbook, however I think the sources are documented well enough. Sim 19:03, 29 April 2006 (UTC)


This article is missing the most important point, which is that the Real Bills Doctrine concerns commercial paper that is *self-liquidating* within 91 days or less (rather than 60 days). In other words, any loan extended is repaid in specie within 91 days (This is in contrast to, for instance, a mortgage which lasts years in duration). This makes Real Bills the next best thing to gold, into which they mature within 91 days or less. They are also extremely liquid since they have such short maturities and self-liquidate, in comparison to longer dated instruments or equities.

In the interim 91 days, the bills can circulate as if they were money when they are endorsed (and this is why lenders are willing to issue them - they can be "rediscounted", i.e. sold and resold repeatedly at discount in the secondary market). As a result of the Real Bills Doctrine, entrepreneurs are able to finance new production by borrowing gold, paying wages with the gold, and repaying the borrowed gold from the proceeds of the sale of their new production. Real Bills thus finances the labor market. In connection with the Gold Standard, it is argued that the Gold Standard cannot work without a system for clearing Real Bills, because without the financing of the labor market that it facilitates, there would be structural unemployment.

The importance of Real Bills self-liquidating into gold cannot be underemphasized. This is because gold is the ultimate extinguisher of debt and has no counterparty risk. In a Fiat money system, cash only enters circulation when bonds are issued. As a result, there is never enough money in circulation to extinguish all outstanding debt (because dollars are issued in equal amount to the face value of the bond, and as a result, not enough money exists to repay both the face value *and* the interest).

I refer you to the work of Professor Antal Fekete for further explanation. ~Thisson, 03/21/2012

===================================[edit]

thorough revision[edit]

I'm starting a thorough revision of this page, as part of my slow project to update the Gold Standard and 19th century monetary policy economics pages. The introduction got a first whack, next is the history of the RBD and the bills clearing system of the 19th century. When this is done I will add material at Gold Standard since RBD is relevant to that - I simply have not had time to update this page and wasn't going to link in the condition it was in previously. Stirling Newberry 12:38, 22 August 2006 (UTC)

Real Bills and Fiat Currency[edit]

In a regime not backed by some specific specie, there is no real bills doctrine, because the central bank uses open market operations for its portfolio - that is, it deals in government securities - and alters reserve requirements. Banks can make loans based on anything that they can show bank examiners has a market value. For example the Import-Export Banke makes loans to businesses to buy goods for sale abroad, the collateral being the goods themselves and their expected resale. Central banks don't need to concern themselves with, and neo-classical economic theory suggests that they avoid - purchasing private securities or other privately created instruments. This rule isn't universally adhered to.

There is also no inflationary, or non-inflationary, question being raised by the purchase of private securities or other instruments. If the central bank is allowing the creation of more currency than the economy can support, there is inflation, regardless of what the central bank is exchanging new federal reserve notes, or what banks are lending. The RBD controversy isn't unimportant - there are countries that go on dollar boards for example - and as a proxy fight over monetarism there is some interest, but the reason for the very thin literature on the subject is that it doesn't have general applicability for most currencies. Stirling Newberry 12:20, 29 August 2006 (UTC)

Reply to the above[edit]

The point of the RBD is that it doesn't matter what kind of asset a bank gets in return for its money. All that matters is that the assets have adequate value. As long as bank assets move in step with the amount of money issued, the money will maintain its value. It is not a question of matching the amount of money to what "the economy can support". It is a question of banks getting adequate assets to back the money they issue.

Currency[edit]

A handful of articles in 20 years does not make this an important controversy in present circles. Indeed the articles were already in the article - checking I put the references in to two of them myself.

Misrepresentation by overweighting minor view points - and indeed you misrepresent even the minor viewpoints that I, in fact, cited in the first place - is against both intellectual honesty and the NPOV policy. Stirling Newberry 01:36, 19 March 2007 (UTC)


Last line of the article[edit]

If a counterfeiter holds assets against the paper money he issues, and if that counterfeiter maintains either physical or financial convertibility of his money, then he is not a countereiter. His net worth is not affected by the issue of money, and he will also not affect the net worth of any other bank (including the central bank), so he will cause no inflation.

Reply to Last line of the article[edit]

Not quite true... Say the counterfeiter mints 100K and then buys 100K in bonds. A year later his assets are worth 110K. The person who sold him the bonds demands his money back, so the counterfeiter sells his bonds and gives the initial bond seller 100K back. This leaves the counterfeiter with 10K which for him is free money. When he spends this 10K into the economy something has to give because he didn't contribute any real wealth, and the net result has to be inflation to balance out his ill gotten gain.

Not quite true[edit]

The free lunch of 10K would attract rival bankers. Assuming costless issue of money, zero-profit equilibrium requires that the banker must pay interest on the money he issues. A dollar would start the year worth 1.0 oz of silver, and would rise to 1.1 oz. at year-end. Then there's no ill-gotten gain. The reason paper money normally doesn't bear interest is that the cost of issuing the money eats up the interest.

Reply[edit]

A couple things here... The idea that it is ok for banks to create deposits because other banks can steal their business, is flawed on multiple fronts. As an analogy, should we permit counterfetters to create money because other counterfetters can do the same? This logic would justify any form of fraud. The reality is, is that barriers exist to free competition to banking such as economies of scale and government regulations. If we were to expect the 'free market' to remove the inflation caused by banks, then the rate of savings would match the cost of loans, which we don't have. Banks typically pay 0% interest on checking deposits and can charge in excess of 10% of loans which means this industry is not very competitive and this is a mute arguement. Dunkleosteus2 17:42, 25 June 2007 (UTC)

Misses the point[edit]

A bank is not a counterfeiter. A bank issues a dollar--either a paper dollar or a checking account dollar--in exchange for a dollar's worth of assets.

Banks don't issue paper dollars anymore (with the exception of travelers checks). Banks are for all practical purposes counterfeiters because they fabricate claims on wealth by convincing (frauding) people into accepting bank deposits as being the same as base money which it is not.

The bank puts its name on those dollars, recognizes them as its liability, and keeps assets as backing for the dollars it has issued. A counterfeiter doesn't put his name on the dollars, doesn't recognize them as his liability, and doesn't hold assets to back them.

Recognizing deposits as a liability is only a bookkeeping entry. Again a counterfeiter could counterfeit 200K, keep 20K of real money on hand, and loan out 180 for say a home loan. For those who notice something fishy about their fake bills, the counterfeiter could give them part of his 20K in real money. So there is no discernible difference between the counterfeiter and the banker. In theory, a bank does not even need to balance credit assets with liabilities, because a bank a bank could just spend that money into the economy and as long as people don't convert their deposits into reserves, the bankers prosper even though they don't have anything on an artificial asset sheet.

The zero-profit assumption is simply standard economics, and is based on the very sound no-arbitrage principle.

The zero-profit assumption is an offshoot of equilibrium theory which is a fraud that has been disproven by many economists. In a nutshell, equilibrium theory can not exist, because the division of labor and trade, creates an increment of association that exceeds the bargaining power of either participant. The result is chaotic pricing with each player having equal bargaining power, and monopolies where bargaining power is hoarded by select traders. The nice neat Zero-profit assumption/Equilibrium Theory of popular economics is just not correct.

Banks face worldwide competition, so the zero-profit condition is not a moot point.

Regulations and economies of scale are enough to ensure the banking industry is not competitive. Not just anybody can start a bank... You need decent startup capital, and critical size to get deposits started. From there banks tend to splinter into regional or specialty monopolies with no serious concern for competition. The biggest proof that banks are not competitive, is their return on equity which is one of the highest of all industries (up there with IT and Drug companies). Besides even if banks were competitive, it would be like having counterfeiters competing with each other. Sure they may lose a bit from competing with other, but by and large they are the winners and we are the losers.

In the nineteenth century, when private banks issued bank notes, they usually claimed that bank notes were not profitable, since the cost of printing, handling, chasing counterfeiters, etc, easily used up interest earnings.

By and large printing issuing bank notes made many people incredibly wealthy. Sure some suffered from runs, were poorly mismanaged, or struggled to get off the ground, but in this doesn't matter because in the aggregate they created a massive amount of money and wealth for themselves.

The main reason banks issued paper notes was that they served as a form of advertising.

Not quite. Banks were a holdover from goldsmiths who merely issued more claims notes on gold then they had. Bankers issues banking notes on first gold then government notes/deposits because it was profitable to do so. Checking is merely a modern day form of issuing bank notes.

If private banks didn't earn a free lunch from issuing paper dollars, it's unlikely that government banks earn a free lunch either.

Banks earn(ed) a mint as do 'government banks'. The Federal Reserve in particular earned over 20 billion in profits in 2006 which it handed over to Congress as part of the budget.

Prof Sproul[edit]

Someone needs to come up with a good argument against Sproul and real bills on this one. I have not seen one yet. —Preceding unsigned comment added by 76.171.131.226 (talk) 08:13, 19 January 2008 (UTC)

I don't see a contradiction in this[edit]

Note that the real bills doctrine attributes inflation to inadequate backing, while the quantity theory of money, in contrast, claims that inflation results when the quantity of money outruns the economy's aggregate output of goods.

I don't see any contradiction in this. Both theories assert that inflation is caused by the supply of money outpacing the supply of real-world assets. Inadequate backing equals, at least to me, the lack of assets in the real world. Goods are assets. Whether the money is inadequately backed by the banks or by the amount of goods produced in the real world is nitpicking to me.Crusty007 (talk) 17:56, 31 January 2008 (UTC)

The real bills view is that the value of money is determined by the assets owned by the institution that issued the money. The value of money would not be affected by assets that are owned in the economy generally. If a bank has issued $100 and the same bank holds 100 ounces of silver, then each dollar will be worth one ounce, regardless of what assets are held in the rest of the economy. If the issuing bank lost 10 ounces, then the value of its dollars would fall to .9 oz./$, regardless of assets owned by others. By the same reasoning, the value of GM stock is affected by GM's assets, but not by Ford's assets, or by the total output of goods in the economy —Preceding unsigned comment added by 66.74.81.122 (talk) 00:50, 1 February 2008 (UTC)

Is the "folksy" explanation (farmer/gambler) good enough?[edit]

The final section mentions some academic work, and an empirical study, to support the real bills doctrine over the quantity theory. I have no argument with that (since I haven't read them yet). It is also mentioned that Ricardo's criticism fails because it assumed the Quantity theory to start with. Again, no problem with the idea that Ricardo's argument is theoretically wrong if it indeed is circular.

What I find hard to believe is that the academic papers would boil down to the mere assertion given in the early part of the article that there can be no inflation when there is adequate backing for the notes issued by the bank. Doesn't it require at least an empirical study to show that the extra amount of notes in circulation make no difference? In which case, the empirical eveidence should be the FIRST thing mentioned. The explanation actually given is hardly convincing is it? If the bank does not make the laon, the assets of the farmer or the gambler are not in circulation, and not buying anything, or only buying things by inefficient barter. It can't be obvious that this makes no difference, can it? Well, it wasn't obvious to at least one reader, i.e. me, and there might be others. E4mmacro (talk) 08:09, 3 November 2008 (UTC)

The backing view has been supported by the work of Sargent (1982), Bomberger and Makinen (1983), Makinen (1984), Smith (1984; 1985a, b), Wicker (1985), White (1986), Imrohoroglu (1987), Calomiris (1988a, 1988b), Siklos (1990), and Cunningham (1992). Several defenses of the quantity theory have been offered, notably by McCallum (1992), Michener (1987, 1988), and Laidler (1987).

If the value of a dollar were not equal to the value of the assets held as backing by the bank, then arbitrage profits could be earned. For example, if the dollar sold in the open market for 1.01 oz., then a trader could borrow 1 dollar, sell it for 1.01 oz, present the 1.01 oz. to the bank for $1.01, and repay the $1 loan for a profit of $.01. Of course the bank would also be eager to issue as many dollars as possible if it could sell them for 1.01 oz while keeping only 1 oz as backing. The same arbitrage arguments mean that a dollar that will be convertible in 1 year must sell for the present value of the assets that can be claimed in 1 year. —Preceding unsigned comment added by 76.87.133.178 (talk) 04:11, 6 December 2008 (UTC)

Informative example[edit]

The “Informative example” section is signally uninformative. It reads like musing turning into a senile fugue. —SlamDiego←T 08:53, 3 February 2009 (UTC)


It is also incorrect in that real bills are only drawable on goods that are to be consumed. Ie seasonal goods, food, clothes, etc. Furthermore history shows that real bills were in existance long before banks and are not dependant on them in any way. Rather clearing houses used to deal with real bills for convencience. 196.209.167.154 (talk) 11:12, 3 March 2009 (UTC) NeverPostedOnWikiBefore :)

Real bills are per definition only drawable on goods that are to be consumed. You are completely right about Real bills coming before banks, but the informative example does not have to cover the history. --DelftUser (talk) 18:43, 22 December 2009 (UTC)

I am somewhat confused by the article, and am trying to understand the meaning of "good bills". Historically, people expected their cash to be backed by some kind of vaulted commodity like precious metals, so the cash was payable "in gold" or "in silver". Saying that cash is issued "in the discount of good bills" appears to be a fancy and archaic way of saying that the asset backing the cash is the bank's portfolio of loans collateralized by goods in the hands of the borrowers. Corwin78 (talk) 01:48, 22 December 2009 (UTC)

"Historically" cash was either gold or silver, what you mean is notes (the modern dollar is a Federal Reserve note). In historical reality notes used to be covered by real bills (discounted bill for goods on their way to the market) and small fraction by gold & silver enough for the expected daily exchange of notes into cash (i.e. gold & silver). If you are still confused, then please list some specific questions and I will try to answer them --DelftUser (talk) 18:43, 22 December 2009 (UTC)

Is the Real Bills Doctrine the notion that changes in the amount of notes circulated should not result in price-level changes, because the value of the paper is tied to the value of deliveries of specific physical goods (and/or assets of equal value) -- and thus it is beneficial for banks to produce as many circulating notes as people would buy?

This article should really be split into two: one for the Real Bills and the other the doctrine. Real bills do not effect prices, this was formulated in the Real bills doctrine. The doctrine is nothing but the statement of a natural truth. --DelftUser (talk) 20:11, 24 December 2009 (UTC)

I can certainly see a factor which a theory, as I stated, ignores. Perhaps price levels (using the notes as the standard of price measure) shouldn't change as a direct effect of the circulation. But increased production of notes backed by loans and price-volatile goods should introduce market and default risks to the bearers. Thus, price-level changes measured in terms of the banknotes could be expected as the risks resolve.

It's not really a theory. The doctrine is only valid when the money is gold & silver coin. --DelftUser (talk) 20:11, 24 December 2009 (UTC)

I'm not suggesting actual edits with my comments. I'm just letting editors know what I am taking (or trying to take) from the article. Corwin78 (talk) 20:28, 23 December 2009 (UTC)

Edits to section Informative example[edit]

It looks like my dialog might have gotten someone to try to wade through this material, evaluate it, and change it. I reverted the post because it changes the theory behind the example given. The bank issues $100 in notes backed by elemental silver. Then the bank issues $500 in notes backed by a third party's promise to GIVE the bank $500 worth of elemental silver plus interest at a later time.

The promise is considered a valuable asset given to the bank. It is worth $500 when the bank "buys" it, or else the bank would not have handed the notes over while taking the promise in exchange. So the bank has $600 in assets to cover $600 worth of circulating notes.

That is what the article about the Real Bills Doctrine was saying, anyway. If you don't consider the promise to be an asset, then you would be making a new theory. The idea is to explain the Real Bills Doctrine.Corwin78 (talk) 23:02, 23 December 2009 (UTC)

You are right. --DelftUser (talk) 20:11, 24 December 2009 (UTC)

Rip off of Someone's Personal Web Page[edit]

This entire article is just Mike Sproul's website for an economics course! http://www.csun.edu/~hceco008/realbillsintro.htm —Preceding unsigned comment added by 128.112.48.144 (talk) 14:34, 23 September 2010 (UTC)

Yeah, you're right. Which makes most of the discussion on this page make no sense whatsoever. — Preceding unsigned comment added by 65.102.59.64 (talk) 03:06, 9 November 2011 (UTC)

Deposits are assets?[edit]

I was wondering why the 100oz. of deposited silver is listed as an asset for the bank? Since the bank owes this 100oz to the depositor, isn't it a liability? The Wikipedia article deposit account also seems to say that deposits are liabilities for banks. Arnob (talk) 11:18, 11 August 2011 (UTC)

Depositing silver is not the same as depositing Federal reserve notes (also known as fiat dollars). The bank in the example is not a modern bank under a fiat currency system. The whole article needs re-writing, I will try to do that soon. --DelftUser (talk) 15:30, 10 November 2011 (UTC)

Call to Action![edit]

This is an article on one of the most important economic subjects, it should be a star article, instead it is a mesh of nonsense! I had my eye on this article for a long time and I was hoping someone would step up, but that has not happened, so this is a Call to Action: if you are interested let us discuss what should be done and then proceed without any juvenile reverting. I suggest removing sections 2 to 6 and 9; we can then edit the remaining stuff.--DelftUser (talk) 15:42, 10 November 2011 (UTC)

Article should be rewritten from scratch[edit]

This article is on a subject of high importance, relating to the basic operation of money systems, and especially the gold standard (pre 1914). International trade under the gold standard was based primarily on flows of real bills and their discount up until WWI.

It should be rewritten from scratch, taking the perspective of supporting the doctrine, explaining why it holds true. Then introduce any evidence and observations which supporting the theory. Then introduce criticisms and evidence (if any) contradicting the doctrine.

The article now simply looks like a diatribe against the whole idea. The RBD had wide support during the era of redeemable money and very widespread international use of bills of exchange. Much of the article and talk seems confused about what real bills are, and a separate page on real bills is a good idea. The period of 1600-1900 saw inflation of the British pound averaging 0.2% per annum, during a period when real bills became commonplace and gold per capita was rising slowly (compared to 4.1% per annum after real bills were forced out (1900-2000)). So historic data is compatible with the theory.

RBD is perfectly compatible with (and complementary to) Quantity Theory (which states P = (MV)/Q hence not allowing price to be predicted from quantity). And it is complementary to the Fiscal Theory too. The article should draw on contemporary (pre-1914) sources, since they focus on the money/banking system as it was. Instead, there is a ridiculous list of books and papers as references, almost all drawn from the modern fiat money era, mainly openly hostile to or ignorant of real money systems. Is anyone working on this? Do you have time DelftUser? Thisson?

— Preceding unsigned comment added by 81.53.57.9 (talk) 20:30, 5 April 2012 (UTC)

Deleted the "Responses" section[edit]

I just deleted the "Responses" section - it read like the author arguing directly against his sources. Looking at the source of the text, I can't be sure who the original author of that argument was, and therefore what expert (if indeed an expert) the argument might be attributed to. In any case, judging by the section on Bank Runs, the criticism that it's responding to is completely valid. --Brilliand (talk) 11:26, 15 July 2012 (UTC)

Agreeing with objections above tried to fix it[edit]

As I agreed with the objections, I rephrased the page, added explanations, and deleted some parts. ngeorgak (talk) 06 November 2012 —Preceding undated comment added 21:26, 6 November 2012 (UTC)

A few days after the above, someone anonymous undid my changes with no explanation. I reinstated them and they undid them again. Fun as this game may seem, I will not play it. All I can say is if a user wants to see a version of this page that makes sense (especially the farmer-gambler example), view it as it was after my edits, on November 6, 2012. It seems that we have an anonymous ideologue that believes in the gold standard and fears fiat money as potentially causing inflation. The answer to this person comes from the financial crisis and the response with the TARP program, creating 700 billion dollars of new money. The new money did not cause inflation because the economy was shrinking. If the US had adhered to the gold standard and not printed any new money then the recession would have become another great depression. Which brings us to the real issue here. Not only is the statement that the RBD prevents inflation wrong, but also the problem with the gold standard is deflation and depression. A look at the history of inflation and deflation in the 19th century in the US shows that. — Preceding unsigned comment added by Ngeorgak (talkcontribs) 15:08, 5 March 2013 (UTC)

Inflation and deflation in the 19th century US is closely associated with money issue by banks against land via mortgages on farms. The bank is in this case is discounting long-term, non-real "bills". A ten year mortgage is not "at sixty days' date", and is not "commercial paper". The economic cycles at that time say nothing about validity of RBD. (I have not edited this article) 212.194.48.112 (talk) 13:57, 30 March 2013 (UTC)

Most of the article should be scrapped[edit]

It's pretty clear that most of this article is confused and confusing at best, and I'd say plain wrong. The writers simply don't understand the doctrine as far as I can tell. The confusion begins with terminology. In the first paragraph, it talks about "money" being issued, then explains it as the bank issuing "notes". But "money" is understood to be what settles debts - under the gold standard, this is gold (coined or bullion). A bank's "notes" are not "money", since they don't settle debts, simply represent a debt owed by the bank. The "bills" concerned are not the "commercial paper" (which are mainly now financial bills/promissory notes) as indicated, but negotiable bills of exchange - essentially orders made by one person to another to pay money to a third person. These bills must relate to real commercial transactions and may indicate what the transaction was for.

Amazing, for an article about how bills of exchange can be used by banks, there isn't even a link to the Wikipedia article on bills of exchange! Could we please have a reminder of what a bill of exchange is, how it is used in a commercial (non financial) transaction, and a link to the appropriate Wikipedia page?

The "informative example" talks about "future production" as "collateral" for an IOU. But the production isn't really collateral at all - it's the goods which are about to be delivered on the farmer's sale to the customer, and can't be seized by the banker if the production failed, nor if the customer defaulted on payment. The gambler and his house as collateral for a debt says nothing about the RBD, since there is no bill of exchange involved - it's irrelevant.

The discussion on "convertibility" is not helpful. It does not mention real bills at all. What it says about bond transactions doesn't relate in any way to RBD (bonds are not real bills).

The section on "Inflation" is unsatisfactory, since it talks about the varying silver value of the dollar, even though the dollar is actually defined (under a metallic standard) in terms of metal. It talks about the gambler again (who doesn't have real bills to discount). RBD does not talk about inflation as a result of inadequate backing as far as I know - in fact it says the banker "cannot go wrong" in issuing notes for good bills.

The section on "use" is hilariously wrong. The RBD cannot conceivably be restated as "So long as money is only issued for assets of sufficient value, the money will maintain its value no matter how much is issued". The doctrine is about the banker's safety in swapping of financial bills for short-dated real bills of exchange. It isn't talking about underlying assets (productive or not) or collateral (the bill of exchange is commonly for a service where there is no asset or collateral). The doctrine doesn't even say anything about money - just the two forms of bills of exchange. It doesn't say anything about value either. It does however talk about maturity being crucial, but this section says this can be stripped and maturity is irrelevant - sixty years is as good as sixty days(!)

The section on "bank runs" returns again to the example of the gambler's IOUs (not real bills!), and again confuses the bank's notes (ie debt instruments) with money (ie what settles debts). It talks about bank customers bringing assets in exchange for new money - again nothing to do with RBD, which relates banks' notes (financial bills of exchange) to private real bills of exchange - not assets for money.

The article's failure is probably a result of the authors and those of some of their references failing to understand how the terms used have changed significantly in the past century. They seem to have applied modern economic analysis and the principles of contemporary monetary systems to what they think is being said, and then mould it to conform to their expectations. The discussions of the gambler's IOUs, bonds and loan collateral have no place in an article RBD. The gamblers IOUs should have been immediately removed as totally off-topic, but have actually been in this article for eight years.

If Wikipedia had a contest for "worst article", I'd nominate this straight away. How do we fix it? I would rewrite it from scratch myself if I thought people would accept it, and we wouldn't get into an edit war. It's more important that the article be correct than comprehensive and lengthy. I consider the topic to be of considerable importance, since it covers the basic principles of how monetary systems used to work, and it sheds light on the global financial crisis. 212.194.48.112 (talk) 23:59, 30 March 2013 (UTC)

Please do rewrite from scratch Dtellett (talk) 22:57, 13 April 2013 (UTC)

Drafting a possible new entry[edit]

I'm working on some ideas which may help resolve the issues in this article. Draft is here. Please email constructive ideas and factual corrections to me (rbd (at) adrianwrigley.com). Thanks. Andronico (talk) 14:11, 19 April 2013 (UTC)

This article is wrong[edit]

For starters, the "T-account", which one would normally just call a balance sheet, is backwards - a deposit of silver (or anything) in a bank is a liability of the bank. In fact, it is the loan that is made with the silver as collateral that is the bank's asset.

" For example, economists all recognize that if GM stock is currently selling for $60 per share, then GM can issue 1 new share, sell it for $60, and there will be no change in the price of GM shares, since assets will have risen exactly in step with the number of shares issued."

This is false - any economist or financier who knows anything about stocks knows about stock dilution. The resulting change in price is observable in stock prices after a split or a rights offering.

I don't know enough about the real bills doctrine however to correct the article completely, although I do know that even at the time when this theory was in vogue they were aware of these things and this isn't what the doctrine meant. Equilibrium007 (talk) 04:21, 31 December 2015 (UTC)

Responses section NPOV issue[edit]

In light of all the other issues discussed above, particularly the 'rip off of someone's personal webpage' one, it seems almost besides the point to say that this section presents opinion as fact, without sources. And yet it is. Helvetius (talk) 15:30, 10 August 2016 (UTC)

Not Commerical Paper but Bankers' Acceptances were the "real bills" the Fed was founded on[edit]

I fixed this problem. It is true that commercial paper was also considered a real bill. But more importance was put on acceptances and after 15 years of support the volume of acceptances outstanding was about three times that of commercial paper (see Banking and Monetary Statistics of the US - 1914 -1941) For explanation see for example: - P. M. Warburg. federal reserve system, its origin and growth. 1930. - R. Lowenstein. America’s Bank: The Epic Struggle to Create the Federal Reserve. 2016. - J. P. Ferderer. Institutional innovation and the creation of liquid financial markets: The case of bankers’ acceptances, 1914–1934. The Journal of Economic History, 63(03):666–694, 2003.

--Marc.1337 (talk) 11:59, 10 April 2017 (UTC)