George Orwell’s classic 1984 describes “doublethink” as holding two contradictory beliefs simultaneously and accepting both. To do so denies the existence of objective reality. A good example is the belief in economic theories that contradict mathematical facts.
Both Austrian and Keynesian economic theories hold fundamental beliefs that do not square up with math. The exponential growth of debt in our debt based money system is ignored and refuted by both theories. In place of math, we are offered beliefs such as the “quantity theory of money.”
To deny the exponential growth of debt cuts to the very core and credibility of monetary theories. If the exponential growth can be proven, then equally, Austrian and Keynesian theories are dis-proven. Economic theories hide the fact that a debt based money system is usury by definition and neither Austrian nor Keynesian theories are sustainable. Both systems create bankruptcies and defaults while enriching banks at the expense of the people.
The inherent and terminal mathematical flaw of debt based systems can be proven anecdotally. Our total money supply (M3) is around $15 trillion while our national and private debt total around $55 trillion. How do we pay an existing $55 trillion in debt with a total of $15 trillion? We are short $40 trillion, where will that money come from?
In our debt based monetary system there is only one way to add money and that is through new debt. Eventually, the $40 trillion must be borrowed. If the money is borrowed, it will add new debt of over $40 trillion (principal + interest). The debt can only grow, it can never be repaid as the gap between money and debt will continue to increase.
The two economic theories will try to explain away this reality by claiming that the velocity of money can be increased so that a given amount of money can be used for more transactions. This is true when we spend money but it is not true when we repay debt. When debt is repaid it is extinguished, that is that the money ceases to exist which means that money can only be used to repay principal debt once. Most of the interest debt returns to circulation but never the less, the gap between money and debt will still increase since only the principal is created through new debt which brings new interest.
The specie of money doesn’t matter. If our money were backed by gold, the gold would simply be transferred to those who collect the interest. We saw this in 1933 when the gold standard collapsed and we lost most of our gold.
The two prevailing economic theories give us a false sense of choice just like the two party system of Democrats and Republicans. The science of money has been replaced by a belief system just like in the dark ages when science was dominated and defined by religious beliefs. If the next renaissance is to happen, it will come when the science of money displaces unfounded beliefs.
We are suffering from an intellectual amnesia. The Babylonians of antiquity understood the destructive power of debt interest and at one time Christianity and Judaism forbid it as sinful usury. The Islamic faith still forbids debt interest and perhaps that is a reason that we are clashing.
Our debt based monetary system is a form of usury that will result in the transfer of all wealth from the many to the few. The intended outcome is debt slavery and tyranny under the cruel boots of oligarchs - a financial aristocracy.
People are becoming discontent and they sense that something is terribly awry. To rebel against the status quo invariably leads to another tyranny as we have seen through democratic elections and third world rebellions.
If a successful peoples revolution is to happen it will really be an awakening. A higher consciousness where we come to understand how and why the game has been rigged by flawed monetary theories.
K, let's save time and skip long rants... is this the compound interest paradox?
Freedom of markets is positively correlated with the degree of evolution in any society...
I smell another trainwreck thread...
we're getting a lot of these lately :(
DrKrbyLuv: To deny the exponential growth of debt cuts to the very core and credibility of monetary theories. If the exponential growth can be proven, then equally, Austrian and Keynesian theories are dis-proven. Economic theories hide the fact that a debt based money system is usury by definition and neither Austrian nor Keynesian theories are sustainable. Both systems create bankruptcies and defaults while enriching banks at the expense of the people. The inherent and terminal mathematical flaw of debt based systems can be proven anecdotally. Our total money supply (M3) is around $15 trillion while our national and private debt total around $55 trillion. How do we pay an existing $55 trillion in debt with a total of $15 trillion? We are short $40 trillion, where will that money come from? In our debt based monetary system there is only one way to add money and that is through new debt. Eventually, the $40 trillion must be borrowed. If the money is borrowed, it will add new debt of over $40 trillion (principal + interest). The debt can only grow, it can never be repaid as the gap between money and debt will continue to increase.
You poor souls who have bought into the "Mathematically Perfect Economy" are laboring under a SEVERE misapprehension.
I'll ask you the same question I asked your compatriot LIBERterryAN, even though he declined to even address it.
If debt necessarily requires exponential growth in the money supply, then how is it that the following debt scenario quite obviously requires absolutely no additional growth in the money supply?
Lilburne: LIBERterryAN: If there is $100 of gold money in circulation, and I borrow all $100 of gold money, at (say) 10% interest, then there is only $100 of gold money in circulation. But, at the same time, $110 of debts exist. Question: Is it not impossible to pay back the debt? No. Let's say you borrow that money from me. Over the course of the year, you do work for me for which I offer you a $60 salary. On the last day of the year, I don't pay you the $60 in gold; I just deduct it from what you owe me. On that same last day of the year, you pay me the remaining $50 you owe me out of the $100 of gold you still have. That's it.
LIBERterryAN: If there is $100 of gold money in circulation, and I borrow all $100 of gold money, at (say) 10% interest, then there is only $100 of gold money in circulation. But, at the same time, $110 of debts exist. Question: Is it not impossible to pay back the debt?
If there is $100 of gold money in circulation, and I borrow all $100 of gold money, at (say) 10% interest,
then there is only $100 of gold money in circulation. But, at the same time, $110 of debts exist.
Question: Is it not impossible to pay back the debt?
No. Let's say you borrow that money from me. Over the course of the year, you do work for me for which I offer you a $60 salary. On the last day of the year, I don't pay you the $60 in gold; I just deduct it from what you owe me. On that same last day of the year, you pay me the remaining $50 you owe me out of the $100 of gold you still have. That's it.
I know it's hard to own up to a very basic mistake, especially when so much time and energy has already been invested due to it. But, you have an anonymous username, so there's an easy way out.
DrKrbyLuv:In our debt based monetary system there is only one way to add money and that is through new debt. Eventually, the $40 trillion must be borrowed. If the money is borrowed, it will add new debt of over $40 trillion (principal + interest). The debt can only grow, it can never be repaid as the gap between money and debt will continue to increase.
Hello Lilburne,
Thanks for responding. Let me take a satb as answering your questions:
"No. Let's say you borrow that money from me. Over the course of the year, you do work for me for which I offer you a $60 salary. On the last day of the year, I don't pay you the $60 in gold; I just deduct it from what you owe me. On that same last day of the year, you pay me the remaining $50 you owe me out of the $100 of gold you still have. That's it".
Personal loans and money earned is not newly created - existing money is transfered between individuals.
In our debt based system, money is created as an electronic entry on a bank's computer. The repayment of that debt is what will cancel the bank entry. Before it is repaid, it can be personally lent or spent over and over.
All of our money is temporary as it must eventually be repaid or written-off through default. If new loans are not created, the money supply will decrease every day by the amount of principal repaid (or greater). Money is being destroyed constantly which means that new loans are required to offset the "leakage."
Eventually, there will not be enough wanting and worthy private borrowers. That's when the government steps in to act as the borrower of last resort. That's where we are today. If the government stops running huge deficits, the system will contract, that is how depressions happen.
Larry
DrKrbyLuv:The inherent and terminal mathematical flaw of debt based systems can be proven anecdotally. Our total money supply (M3) is around $15 trillion while our national and private debt total around $55 trillion. How do we pay an existing $55 trillion in debt with a total of $15 trillion? We are short $40 trillion, where will that money come from?
That's where the fallacy is. The money can pay the debt by being passed around, obviously. Some people both owe money and are owed money.
money crank alert
Publisher, Laissez-Faire Books
"That's where the fallacy is. The money can pay the debt by being passed around, obviously. Some people both owe money and are owed money."
is the debt-money a problem when 'the money' goes to something other than someone being owed?
is the debt-money a creation of govt caprice that a market couldnt do? or this that the wonderfulness of having govt control the 'money'?
DrKrbyLuv:The exponential growth of debt in our debt based money system is ignored and refuted by both theories. In place of math, we are offered beliefs such as the “quantity theory of money.”
Huh? The "exponential growth of debt?" There is no empirical or theoretical reason to believe that debt must grow exponentially.
DrKrbyLuv:To deny the exponential growth of debt cuts to the very core and credibility of monetary theories.
How so? Prove your statement.
If the exponential growth can be proven, then equally, Austrian and Keynesian theories are dis-proven.
Again, how so?
DrKrbyLuv:ur total money supply (M3) is around $15 trillion while our national and private debt total around $55 trillion. How do we pay an existing $55 trillion in debt with a total of $15 trillion? We are short $40 trillion, where will that money come from?
When you pay back debt, the money you paid that debt with doesn't suddenly disappear. It simply goes to the creditor. The creditor then spends, saves, or invests that money. In other words, most of that money goes back into the economy and it probably enters the income stream of another debtor who then can use that money to pay back his debt. Thus, there can easily be more debt than money.
DrKrbyLuv:In our debt based monetary system there is only one way to add money and that is through new debt.
Not true at all. Most of the money that the Federal Reserve creates is through the purchase and monetization of government bonds. In other words, the Fed actually reduces the amount of debt when it expands the money supply.
Then again, Austrians are not fans of central banking or the current state-managed banking system. So why do you criticize the current banking structure and then claim that this is somehow an attack against the Austrian school?
DrKrbyLuv:This is true when we spend money but it is not true when we repay debt. When debt is repaid it is extinguished, that is that the money ceases to exist which means that money can only be used to repay principal debt once.
No, when you repay debt, the creditor receives the money. The creditor then spends a portion of that money, feeding the income stream of other debtors. The portion of that money that the creditor lends out again is then spent by the debtor, so that that money enters the income streams of other debtors, thereby enabling them to pay off their debt. Basically, it's a giant web of interactions that enables the debt to be greater than the money supply.
DrKrbyLuv:If our money were backed by gold, the gold would simply be transferred to those who collect the interest.
Again, debt repaid would simply be spent by the creditor or the creditor's other debtors, thereby enabling the repayment of other debt.
We saw this in 1933 when the gold standard collapsed and we lost most of our gold.
Not at all. What happened in 1933 was that the money supply shrank when the Fed raised rates in order to stem the outflow of gold to other countries. At the time, the USA was the greatest creditor nation. That, according to your theory, is an impossibility.
DrKrbyLuv:If the next renaissance is to happen, it will come when the science of money displaces unfounded beliefs.
Unfounded beliefs like those that state that we have a "debt based monetary system." What bullocks.
DrKrbyLuv: We are suffering from an intellectual amnesia. The Babylonians of antiquity understood the destructive power of debt interest and at one time Christianity and Judaism forbid it as sinful usury. The Islamic faith still forbids debt interest and perhaps that is a reason that we are clashing. Our debt based monetary system is a form of usury that will result in the transfer of all wealth from the many to the few. The intended outcome is debt slavery and tyranny under the cruel boots of oligarchs - a financial aristocracy.
Non sequitur, non sequitur, non sequitur... Seriously, is there anything that you say that follows? How is charging interest harming society?
Political Atheists Blog
Austrian economics does not *fail* if its discourse on free currency differs from the realities of government fiat currency...For example,
if we had a central bank that printed money every other year and if the serial numbers on the bills summed to your mother's maiden name they wouldn't work and if the value of odd numbered bills doubled on alternate leap years and if even numbered bills could be exchanged for their weight in energy bars and if bills folded into airplanes were programmed to self destruct,
what would happen?Uhoh the Austrians (and everyone else) can't tell you. I guess that means Austrian economic theory about free currency is wrong.derp derp derp derp derp derp derp.What is with these trainwreck threads? We have some bad ones lately... And whats sad is that educated thread-makers get relatively few responses and bad threads get a lot of responses since the topics are intolerably stupid.
sthomper: is the debt-money a problem when 'the money' goes to something other than someone being owed? is the debt-money a creation of govt caprice that a market couldnt do? or this that the wonderfulness of having govt control the 'money'?
No, government control of the money supply can increase the amount of debt (and of money, and of lots of other things) but does not alter the underlying fact. I don't know what you mean by the money going to something other than someone being owed. It's just a simple mathematical relationship that, independent of the amount of debt, the "overlap" is always enough that all the debt can be paid back. If you loan me a dollar, and I loan it back to you, and you loan it back to me, and we repeat the process a thousand times, then on the books we'll each have debts of a thousand dollars, and since there's only one dollar in circulation, the OP will say the debt can never be repaid. But of course it can - I'll give you back the dollar, you'll use it to pay me back, I'll use it to pay you back, and so on until all the debt is wiped out. Now try to create a situation where we pass the dollar around and create debt that cannot be paid back. Sure, there are some people who are owed money and do not owe money, but they're all accounted for.
There are plenty of evils to attribute to the banking and government systems. There's no need to create evils that don't exist.
Notice, by the way, that in my example we did something worse than fractional reserves, and had no reserves at all, yet it didn't alter the basic accounting relationship.
What happens to money after it is spent towards a debt? Is it destoryed? Nope, its stil in circulation available to be spent towards a different debt.
Peace
im confused then.
if a frb bank lends 90percent of $100 deposit and leaves $10 plus $90credit .... yielding a total of 100 dollars+dollar credits .... when the $90 is repaid isnt the $90credit removed?
is this what the author meant by "When debt is repaid it is extinguished, that is that the money ceases to exist which means that money can only be used to repay principal debt once."
Hi Larry,
Let's keep things simple for now. You contend that the problem of "usury" requiring exponential money growth would occur even in a specie-based system in which money cannot be just entered into a computer...
DrKrbyLuv:The specie of money doesn’t matter. If our money were backed by gold, the gold would simply be transferred to those who collect the interest.
So then how does that contention agree with the fact that no monetary expansion is required in my hypothetical gold-based scenario...?
sthomper:if a frb bank lends 90percent of $100 deposit and leaves $10 plus $90credit .... yielding a total of 100 dollars+dollar credits .... when the $90 is repaid isnt the $90credit removed?
When it is paid back, the bank has $100 on hand, just enough to pay the depositer (a bank deposit is really just a loan to the bank.) The depositer can now pay whatever he owes to anyone else, up to $100... what's the problem?
the authors post stated this
"When debt is repaid it is extinguished, that is that the money ceases to exist which means that money can only be used to repay principal debt once."
earlier in this thread there was some discussion of whether debt is destroyed when repaid.
i was wondering if the post author was referring to frb bank credit when he mentions the money ceases to exist when debt is repaid.
i didnt say anything about a problem.
"To deny the exponential growth of debt cuts to the very core and credibility of monetary theories. If the exponential growth can be proven, then equally, Austrian and Keynesian theories are dis-proven. "
i am not quite sure what this means.
www.economagic.com says (if true) that "currency in circulation" which i assume is "money" is at 915 billion
economagic.com also says that m2 (minus 915 billion in currency in circulation) is at about 7.5 trillion.
i am not sure what the proper term for the 7.5 trillion things is. is it debt, dollar-credit????
economagic.com says that currency in circulation (aka MONEY) in 1960 was at about 34 billion
and m2 minus 34 billion in CiC was at 300 billion.
it all seems exponential to me.
sthomper: the authors post stated this "When debt is repaid it is extinguished, that is that the money ceases to exist which means that money can only be used to repay principal debt once." earlier in this thread there was some discussion of whether debt is destroyed when repaid. i was wondering if the post author was referring to frb bank credit when he mentions the money ceases to exist when debt is repaid.
I don't know what he meant. My point in posting was to point out that you can see the fallacy in his thinking by just looking at the line I responded to.
"I don't know what he meant. My point in posting was to point out that you can see the fallacy in his thinking by just looking at the line I responded to."
the information about frb was my thinking....the post author never broght up the frb scenario, which i described as i have read at mises.org sites.
is there an instance in the existing bankning system where debt(also bank credit?) is destroyed or removed when repaid?
"When debt is repaid it is extinguished, that is that the money ceases to exist..." post author
does this (debt or bank credit) ever take place in todays banking system???
I draw a circle which represents the sum total of money in circulation.
I draw a bunch of dots in the circle to represent every entity that spends and receives money.
If a dot profits it will grow larger because it receives more than it spends.
There is a direct mathematical relationship between dots that grow larger and dots that reduce in size.
Is it natural if people are required to be a dot in the circle in order to exist?
Well, certainly there is less money after a frb loan is repaid. But, of course, there's also less debt. The same thing happens in my scenario. In some sense, you can say that money is "destroyed" when we all pay back our debts in my scenario, but this does not cause the problems the OP points to.
Hello krazy kaju,
Hopefully this will clarify some of your questions:
I wrote: "In our debt based monetary system there is only one way to add money and that is through new debt."
krazy kaju wrote:
There is no reason for the U.S. government to borrow money from private banks. Thomas Edison said "If our nation can issue a dollar bond, it can issue a dollar bill. The element that makes the bond good, makes the bill good also...If the currency issued by the Government was no good, then the bonds would be no good either. It is a terrible situation when the Government, to increase the national wealth, must go into debt and submit to ruinous interest charges "
Our total money supply (M3) is around $15 trillion while our national and private debt total around $55 trillion. How do we pay an existing $55 trillion in debt with a total of $15 trillion? We are short $40 trillion, where will that money come from?
__________________________________________
I wrote: "We saw this in 1933 when the gold standard collapsed and we lost most of our gold."
The reason why the U.S. defaulted on the gold standard was because we didn't have enough gold to back our money, it was a lie, fractional reserve backing. If the U.S. had enough gold to back it's currency then we would not have defaulted. That's the problem with a debt based system that uses fiduciary money (money backed with a promise of PMs), in this case, there wasn't enough gold. The gold standard had already failed in GB and most of Europe two years earlier - for the same reason.
It had nothing to do with interest rates.
As a side note, when FDR closed domestic gold redemption there was no need to confiscate the people's gold since the money could no longer be redeemed. It was theft plain and simple - government paid well below market rate. We could lend all the money that we wanted as long as people thought we had enough gold.
The worst part about the depression was that while the non-Federal no-Reserve banks lent money that we alone backed. They loaned the money at profit (interest collected) but the U.S. Treasury backed it up. You will see this worded on FRNs of the time.
JonBostwick wrote:
My Response: Money is created by banking entries and when it is repaid, it is canceled. For example, if you pay off a car loan you have no more debt. The debt based money no longer exists. So it is accurate to say it is destroyed.
Lilburne wrote:
Agreed, if I borrowed the money from you then it was existing money. It was not created when I borrowed it and it is not extinguished when I repay it.
sthomper wrote
Yup, I agree, this "caprice" money may be equally created by government or a private monopoly. The difference is that we pay private banks interest.
Private banks earn collect interest on money they do not back up, guarantee or insure. Their product is essentially free.
JAlanKatz wrote:
No, government control of the money supply can increase the amount of debt (and of money, and of lots of other things) but does not alter the underlying fact. I don't know what you mean by the money going to something other than someone being owed. It's just a simple mathematical relationship that, independent of the amount of debt, the "overlap" is always enough that all the debt can be paid back. If you loan me a dollar, and I loan it back to you, and you loan it back to me, and we repeat the process a thousand times, then on the books we'll each have debts of a thousand dollars, and since there's only one dollar in circulation, the OP will say the debt can never be repaid.
I agree that common sense would support what you say. That's the problem.
But I contend that banks do not lend their or their depositors money. It is created on the spot for free.
DrKrbyLuv:But I contend that banks do not lend their or their depositors money. It is created on the spot for free.
You contend that banks don't loan out depositors money?
'Men do not change, they unmask themselves' - Germaine de Stael
If you repay me the money stays in circulation. But if a bank creates it through their monopoly; it is an entry on a computer - with no backing. When that bank receives payment, that amount of money attributed to the principal does cease to exist as the ledger liability cancels out the asset.
well, they do and they dont. that is the essential fraud of the FractionReserveBanking system. banks do lend out their depositors money, whilst paradoxically,they also do not lend out their depositors money and therefore have it presently there available for their depositors to claim at any time.
this contradiction is one of the state run banking system, and not one of banking in general (banking under free market conditions etc)
the problems of the present economy, are the problems of state-run FRB. If that is all you are critiquing then I am in agreement with you.
If however you falsely believe that there is some general problem of 'interest' then you are sorely mistaken. in a free market there is no such 'interest' problem. Others in recent days, using overbearing language have jumped up and down about 'interest' problems, whilst failing to see that there are no 'interest' problems, there are only government problem. I dont know if you are or arent one of these......
Where there is no property there is no justice; a proposition as certain as any demonstration in Euclid
Fools! not to see that what they madly desire would be a calamity to them as no hands but their own could bring
I'm getting the feeling that you don't really know what the Austrian theory on the matter is...
Laughing Man wrote:
Yes, that's accurate though the implication is otherwise. Most people think they are borrowing depositors money but if that were true, the depositors would not be able to withdraw the portion of their money that was loaned out. For example, if total deposits were $1,000 and $500 dollars were loaned out, then the depositors would only be able to withdraw a total of $500. The bank clerk would need to inform people that some of their money was loaned to others.
So far all I see is a rant on fractional reserve banking and an attack on Austrian Theory without stating which part of Austrian Theory and how it's wrong.
Saying the math is wrong with Austrian Theory is kind of missing the point, isn't it?
DrKrbyLuv:There is no reason for the U.S. government to borrow money from private banks.
But they do.
DrKrbyLuv:homas Edison said "If our nation can issue a dollar bond, it can issue a dollar bill.
The FED creates money, not the treasury. It increases the money supply though open market operations, funneled through the banks. Either way, the government isn't going to sit there and print 10 trillion dollars, and then dump it directly into the economy, it would be too obvious. It's far more efficient a to inflate through the banking system, and conceal the sinister plan.
DrKrbyLuv:Our total money supply (M3) is around $15 trillion while our national and private debt total around $55 trillion. How do we pay an existing $55 trillion in debt with a total of $15 trillion? We are short $40 trillion, where will that money come from?
From taxation. 15 trillion dollars could pay off 10000000000 trillion dollars of debt (mainstream economists call this "velocity").
DrKrbyLuv: All money is created through debt (debt based system). The money is created by private banks through loans - if we had no loans, we'd have no money. There is no permanent money in our system. It is created as debt and the principal is extinguished as the bank entry is canceled out. It ceases to exist. Banks do not lend their or existing money. If they loaned depositors money, people wouldn't be able to write a check for their total balance since some would be lent to others. Virtually all of borrowed money is created on the spot. Money can only be used only once to repay principal debt owed to a bank. But you're right in that the collected interest is almost entirely spent back into circulation.
DrKrbyLuv:The reason why the U.S. defaulted on the gold standard was because we didn't have enough gold to back our money, it was a lie, fractional reserve backing. If the U.S. had enough gold to back it's currency then we would not have defaulted. That's the problem with a debt based system that uses fiduciary money (money backed with a promise of PMs), in this case, there wasn't enough gold. The gold standard had already failed in GB and most of Europe two years earlier - for the same reason.
It's called the price species flow mechanism. Look it up.
"If we wish to preserve a free society, it is essential that we recognize that the desirability of a particular object is not sufficient justification for the use of coercion."
DrKrbyLuv: I agree that common sense would support what you say. That's the problem. But I contend that banks do not lend their or their depositors money. It is created on the spot for free.
No, it is not "created on the spot." They have a fractional reserve system - the amount of loans is still tied to deposits. Let's do this: take a dollar bill, and pretend that's all the specie there is (and pretend it's specie.) We'll use a reserve fraction of 0 - you loan the dollar to me, and I say "hey, I have a dollar, I'll loan it to you." Now, on the books, I owe you a dollar, and you owe me a dollar. Now, you take that dollar, and loan it to me - now there's three dollars on the books. Repeat the process 100 times, producing $200 of book value with only one dollar of money. Certainly, we can't pay the debts off with so little money, right? But, in fact, we can, by unravelling the same process. But this is the same as your argument for what happens in the real economy, which has the same flaw. The money paid to pay the first round of debts is used to pay the second round - and it is simple accounting to see that it will have to paid to the right places, enough of the time, to make it work, otherwise you never could have created the debt structure in the first place. If you want to talk about banks simply increasing numbers on computers, then you should realize that, by that logic, we also don't need money to pay the debt, we can do that with computer numbers too.
Now, you want to say that actually, the real situation is that I have a dollar, and I loan you a dollar without handing it to you, just by saying "I loan you a dollar," and that process is repeated 200 times. First, that's not how banks work, and second, even then we could use a single dollar bill to pay the debts off.
nirgrahamUK wrote:
Hello nirgraham, I agree that fractional reserve lending is essentially fraud. The old rule of thumb was that for every dollar held in deposit, ninety cents could be created and lent. Then if the ninety cents were loaned out and deposited in that or another bank, another 81 cents could be lent out...and on and on. Listed below is a money multiplier graph showing various reserve requirements.
Last year, we had many big banks that were heavily leveraged, for example I think JPM was at over 40:1 which means that for every dollar on deposit they had lent out $40. The Federal Reserve may also lend money to banks to build up their reserves. This is called "high powered money" and it may be expanded by a factor of 10. Last year over $700 billion was given to the banks which means that that seed money could be multiplied to $7 trillion.
BTW, only banks can create money so it was odd when the banks asked for a government bail-out. The U.S. doesn't create any money so we had to borrow the bail-out money from the banks...with interest added, to give it back to the banks.
If however you falsely believe that there is some general problem of 'interest' then you are sorely mistaken.
We may have to disagree here, but only in part. Interest on all new money will cause problems as I discussed in my original post. I think you can see this in the charts below (Data from the Federal Reserve) :
The dotted line in the chart is an idealized exponential curve, while the solid line is actual monetary data.
So, yes, I think interest is a problem. Many might disagree with me and say that all interest charges must be stopped to prevent the above from occurring. But I think there are many other things that can be done. For example, debt free money could be "spent" into circulation to offset the gap between money and debt.
Cheers,
DrKrbyLuv:For example, debt free money could be "spent" into circulation to offset the gap between money and debt.
Why not just have market money?
DrKrbyLuv:So, yes, I think interest is a problem.
Interest isn't the problem. Interest is the discount on money over time. To remove interest, is to have an irrational economy which doesn't have the appropriate signals to allocate resources across time.
I suggest before you carry on with your current direction, you at least learn Austrian positions on time, capital and value.
Esuric wrote:
15 trillion dollars could pay off 10000000000 trillion dollars of debt (mainstream economists call this "velocity").
The velocity of money enables a given amount of money to be spent more times in a year. But if is spent in repaying debt to a bank, it ceases to exist. New money is created by the banks and loaned to customers that furnish an IOU (and collateral). The money is created as a journal entry, it becomes an asset to the bank and a liability to the borrower. The liability is removed through repayment and equally, the asset is removed from the bank.
$1 trillion dollars can only repay $1 trillion dollars, and only once.
I'm not sure what you meant by using that term. Are you saying that the gold left our shores in the late 1920's and early 1930's through trade deficits?
Thanks,
liberty student wrote:
Thanks for the interesting response. I think we agree and disagree. First, I think you are correct in that if someone lends their money, they are entitled to a return, especially if it's a stranger or a business arrangement. But my contention is that:
Banks could profitably be compensated by transaction fees and service charges. I don't see how they are entitled to interest charges. Of course, this would change if they were actually lending their own money.