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22 March 2014


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Apologies, it ought to "William Gibson."


I must cease using words like "nation-state", Col.

Most misleading indeed (from your point-of-view).

What synonyms would you suggest for modern states & countries?



IMO a nation-state exists when an ethnic people bound together by language, tradition and history exist almost exclusively within the borders of a state (country) that is governed by s coherent system of law. Japan is a nation-state. Korea would be a nation-state if the two halves were united. Germany is not a nation-state. Germans live in great numbers in Germany, Austria, Switzerland, Belgium (Flemings), arguably the Netherlands whether the Dutch like the idea or not. and in pockets all over central and eastern Europe. A "state"(country)is a territory with borders recognized in international law and that is governed by a system of law that has power throughout the state. It is of no consequence whether or not a "state" is ethnically uniform. The Russian Federation is a state but it is not a nation-state. pl

nick b


With your nom-de-web, I should have realized! I will look for Sterling and Gibson. Many thanks.

William R. Cumming

Babak! Some estimate federal funding behind 80% of all new ethical [legal]drugs.


A statute little understood outside FDA!



I'm sorry, although it may seem a small point, your idea on the whys and wherefores of New Jersey not having self-service gasoline stations is incorrect. There is NO state cabal to provide low-skilled workers with jobs commensurate with their abilities. The notion is laughable; in my state, that is the absolute LAST agenda item on the "to-do" list of our politicians. Rather, they are all about provision of tax abatements for corporations so that "please, pretty please" they will set up business here.

Actually, what happens is that there are periodic efforts, instigated by some owner types to try and inflict the self-service idea on the citizens, and every time the politicians are told in no uncertain terms that we DON'T want it. We don't want senior citizens, people with handicaps, parents with infants and fretful children strapped into their vehicles, or anybody else for that matter, to be shanghaied into providing FREE LABOR for business owners who, instead of serving their customers, want their staff to consist of one guy sitting in a glass booth. That's the way to the crapification of yet another area of our daily lives. I don't want to have to carry around wet wipes in my car to try and cleanse -unsuccessfully - the stink and grime of a gas pump nozzle off of my hands every time I am forced to do work for the station's owner. I don't want to see my fellow citizens have their pockets picked by greed-driven, cost-cutting station owners. We expect them to provide a service. Additionally, we don't want some clod right next to us at the service plaza pumping gasoline with a lit cigarette in his mouth, we want gas jockeys who have a clue about the dangers of open fire and static charge buildup around a highly flammable liquid.

A story. I go out of my way to patronize a service station staffed by young local men. Why? Not only do they pump the gas, but they greet you, they thank you, and they will even do simple jobs like inflating tires (I usually do this myself, but it is nice to know that if I were a woman who was 9 months pregnant, that they would do it for me). They are from the community, they are employed, they are trained to be and expected to be polite, and they safely provide a vital service. What's not to like? Now, contrast that to some dweeb sitting in a booth, providing no service, and all of the work and stink thrust at you. So the one interested in there being work at the low-skilled level...is ME, most definitely not politicos, who cravenly serve business interests, and notice the citizens only when threatened and pushed.

Here's another too-clever-by-half idea from Modern Business Management; self-checkout at the supermarket. What I saw at a market I used to patronize was this. A worker from office management - hence, likely not unionized like the staff - manned a command post at a bank of self-checkout stations. Hapless customers tried to check out their own orders, but often something would not scan correctly, and they would have to wait for the office worker to sort it out. And the office worker, because they were not a "dedicated" employee, would often not be at the station, so the customer would have to wait. Time is money, but not for the customer, evidently . But management sure stuck it to that union by not employing an expert check-out clerk to smoothly serve the, uh, customers. Oh, yeah, those people.

Rant over, back to your regularly scheduled programming.

William R. Cumming

MRW! Agree and thanks for the Lacey book reference!

I was told by a NARA rep that the Treasury department had authorized destruction of all its records on financing WWII! Glad some survived. My question to NARA was prompted by the potential need to mobilize the Nation's resources
in some kind of national catastrophic event!

I also recommend a book by Alan Witt on how all the great powers mobilized their industry in WWII!

With all the discussion of US currency in this thread I think some might find the following tidbit of interest.

The unofficial [off-the-books] world economy [underground?] operates largely in US dollars. Many counterfeited in the Baka Valley and N.Korea.

Then Secretary of the Treasury or Presidential Advisor Robert Rubin carried $30B in new US $100 bills to Moscow just before the Yeltsin election. The cover story was that this currency drop was to replace damaged $100 bills from within the former Soviet Union. According to my sources whom I believe NO DAMAGED BILLS were ever returned.


William R. Cumming

CORECTION! The book I recommended on industrial mobilization in WII in all the major combatants was by Alan Millard.

Norbert M Salamon

According to your definition, Sir, end of WWI to a large extent negated many nation states, by break up of Austria Hungary and Ottoman Empires. Similarly the after effects of "new maps" at the end of WWII created new havoc, never mind the Kosovo incident, Khrushchev and Crimea, The African Continent, various interesting events in Central America, East Timor and Goa, Palestine [clear-cut post war imperialism by anti-Semitic UK], Hong Kong and Taiwan, Singapore et al other micro states.

A different criticism applies to Mr. Cumming's definition: capable of defending her sovereign area; this is applicable to only a very few countries: US, Russian Federation, possibly Iran - due to the cost it can exact against the world by destruction of the Persian Gulf oil production; Possibly China [against anything but nuclear attack via ICBM-s].

Norbert M Salamon

The cursed FRACTIONAL Money creation of private banks - caused even more trouble than the collective damage done by various central banks measures - especially noticeable after 2008 - including all the credit default swaps, securitizations, etc



By my definition neither Austria-Hungary nor the Ottoman Empire were "nation-states." Arnold Toynbee would have called them "ecumenical empires."

William R. Cumming

Thanks again NMS! The maps are crucial for their pretensions of meaning. And perhaps your analysis confuses ways and means.

I like PL's use of ethnicity in the definition of nation-state or lack thereof. Hoping others will weigh in because this concept [nation-state] seems problematic for this century. BUT OF EXTREME IMPORTANCE!

nick b

"No US debt (money) is held outside the USA. By law. Period. Can't happen, does not happen, except for the actual 11% physical cash that is created for walking around money. All foreign bank US dollar accounts are at the NYC Federal Reserve."


I am confused, how does this account for the Eurodollar market?

Norbert M Salamon

Sir< I am aware of that, my reference was that both WWI and WWII's new borders cut across numerous ethnic lines, for the convenience of Yalta, Versailles etc. Hungary lost 2/3 of its historical area [excluding the Ottoman empire period] and about 35-40% of her ethnic population. This was the reason behind my observations. Similar effects overtook Poland, Germany etc. - never mind what happened in the Middle East.


Agreed, Norbert, fractional reserve banking sure does cause trouble in a fiat money environment with a generous central bank (and when aren't they). The absence of constraints inevitably leads to gross excess; the only question is how long it takes and how bad it gets.

However, if money is specie based and banks operate without any special regulations or advantages, fractional reserve banking can actually work rather well. There are quite a few historical episodes (Scotland, Sweden, Hong Kong and so on) where free banking, as it's called, functioned smoothly and effectively for long periods.


There has been no such thing as fractional reserve banking since we went off the gold standard. Loans create deposits in the USA, not the other way around, even 'fractionally'.

Banks then have to maintain reserves which are a small percentage of the amount of the loan. Banks CANNOT loan out reserves. If the customer moves the loan from Bank A to Bank B, those reserves get transferred to Bank B. (If Bank A doesn't have enough reserves to move them, they have to borrow from other banks at the Fed Funds rate or borrow form the Federal Reserve.)

One of the few places on the planet that still uses fractional reserve banking is Hong Kong, but no other modern economy does. This is a relic that has survived in someone's imagination.



Only Congress can create base money (the high-powered money of the state) by appropriation. That's how currency is issued. That appropriation authorizes the US Treasury to tell the Federal Reserve to mark up its general account at the Fed. In that way, you could say the Federal Reserve creates it, but the Fed cannot create it on its own because it wants to. Hell, it is not even allowed to buy US Treasury securities at auction. It can only buy them on the open market from the 12 or 20 dealers authorized to buy and sell them.

This is not bank credit money.

The amount of base money created "over the entire life of the republic" since 1791 (minus the amount destroyed called taxes) is $17 trillion-plus. It's called The National Debt. Another way of labeling it is The National Equity, or The National Money. That $17 trillion is in the citizens' pension and savings accounts to the penny.


Thanks, WRC. Same thing happened after in Iran before the revolution. We not only brought the $100 plates and printing press (basement of the US Embassy), we brought two pallets of paper. That's the reason why the $100 bill was changed subsequently. The $100 plates were in the occupied US Embassy vault. ;-) Bet the students never figured that out. But maybe they did.


I don't understand the question.


Norbert M Salamon and ingolf, read this Steve Keen's article about how the Bank of England under the Canadian governor guy is trying to correct people's ideas about how money is created and how it goes through the system in modern economies. Fractional banking is one of the first to go.
"The BoE’s sharp shock to monetary illusions"





Test what? pl

nick b


As I said, I was confused. Much about the Eurodollar, especially its name, is confusing. Eurodollars are US denominated holdings in foreign banks. But they are time deposits which never really leave the US. I get it now. Thanks.



Sorry to be so slow getting back to you. I hadn't seen your reply till just now.

Here's the St Louis Fed page with charts, data and definition of the monetary base:


If you're interested in delving deeper, here's a link to the latest publication from the St Louis Fed on US financial data, with definitions included right at the end. (The St Louis Fed is arguably the most active of the various Fed branches in providing research and data.)




I also hadn't seen this comment (or the one immediately below) so, once again, apologies for the delay in replying.

Fractional reserve banking (FRB) is the norm everywhere. Precise definitions vary but in principle it simply means banks hold only a fraction of their demand deposits in the form of cash or highly liquid securities and lend out the rest. This of course creates the potential for liquidity crises if sufficient customers wish to withdraw their demand deposits on short notice. For the last hundred years or so, this risk has been largely underwritten by central banks providing a liquidity backstop.

The (largely theoretical) alternative to FRB is 100% reserve banking, which doesn't meaningfully exist since there's almost no demand for this level of security in a bank and such institutions had no chance of competing with FRB banks.

I'm well aware that "loans create deposits", not just in the USA but everywhere. See my comment above: "Whenever a bank issues a loan (or purchases securities), money is created when the proceeds in due course find their way back into the banking system somewhere as a deposit." Steve Keen's views have also long been well known to me (including this particular article which I read when it first came out in Business Spectator). For the most part I agree with his take on these matters.

Some banking systems do still require banks to hold (usually minimal) levels of reserves, some require no reserves at all. As you say, banks can't lend out required reserves but they can certainly lend out excess reserves, which in the US now constitute about $2.6 trillion (of which required reserves are only $77 billion).

Reserves get moved between banks' balances at the central bank whenever net settlements occur, in other words pretty much on a daily basis. As an aside, the banking system as a whole can't get rid of reserves (excess or otherwise); their level is entirely under the control of the central bank. Individual banks, however, can do so by making loans or purchasing other assets. Whether they succeed depends on overall flows between banks on any given day.

P.S. Am I right in assuming you singled Hong Kong out because some of its banks have retained the right to issue currency?

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