DrKrbyLuv:Virtually all money is indeed created as debt.
All money is created as a debt, there is no exceptions today. "There is no such thing as debt free money under US law" Thomas Woodward U.S. Congressional research service.
Debt money. Debt money is money that is created as a liability. A debt based monetary system is an economic system where money is created as a liability to the party issuing the money, or as a debt to the pary receiving the money, or as a debt to both the issuing party and the receiving party. This form of money is called debt-based or debt money because someone must have a debt for the money to exsist before the money can move into circulation.
There seems to be a great deal of misunderstanding with respect to the mechanics of our money. Here are some important points made by Wright Patman:
6. Does Congress supervise Federal Reserve policymaking? No. In practice the Federal Reserve is “independent” in its policymaking. The Federal Reserve neither requires nor seeks the approval of any branch of Government for its policies. The System itself decides what ends its policies are aimed at and then takes whatever action it sees fit to reach those ends.
9. Why is final control of economic policy a problem? Because with an “independent” Federal Reserve, Congress and the President can be moving in one direction while the Federal Reserve is moving in the other. The result is sometimes no policy at all. At other times, it leads to the Federal Reserve’s neutralizing the President’s economic policies. This very possibility caused President Johnson to request the Federal Reserve in his 1964 Annual Economic Report to Congress not to nullify his efforts to reduce unemployment and raise incomes. Should the President have to ask any Government agency to go along with his policy as approved by Congress? Obviously not.
26. What is legal tender? Legal tender is any form of money which the U.S. Government declares good for payment of taxes and both public and private debts.
34. What backs U.S. currency? Federal Reserve Notes are backed by the credit of the U.S. Government. American citizens, holding Federal Reserve Notes, cannot demand anything for them except (a) that they be exchanged for other Federal Reserve Notes, or (b) that they be accepted in payment for taxes and all debts, public and private.
35. Has the United States gone off the gold standard? Yes, except in its international transactions.
36. Does this change the basis of our money? In reality, no. The action, which Con took in 1934, merely formalized what had been true all along, which is this: since the 19th century checkbook money, now 80 percent of our money supply, has replaced notes as the most important form of money. And check-book money is created on the basis of all kinds of valuable assets. When a bank makes a loan to a business firm, secured by inventories of machinery, or to a farmer, secured by farm assets, it has, in effect, created a dollar “backed” by inventories, machinery, or farm goods.
47. Where does the Federal Reserve get the money with which to create bank reserves? It doesn’t “get” the money, it creates it. When the Federal Reserve writes a check, it is creating money. This can result in an increase in bank reserves—a demand deposit—or in cash; if the customer prefers cash he can demand Federal Reserve notes, and the Federal Reserve will have the Treasury Department print them. The Federal Reserve is a total moneymaking machine. It can issue money or checks. And it never has a problem of making its checks good because it can obtain the $5 and $10 bills necessary to cover its check simply by asking the Treasury Department’s Bureau of Engraving to print them.
48. Who gave the Federal Reserve the power to create the money necessary to cover its checks? The Congress. Because this power to create money is given by the Constitution to Congress, only the Congress can delegate this power. And this it has done in creating the Federal Reserve System—an agency of Congress authorized to create money.
69. If the Government can issue bonds, why can’t it issue money and save the interest? A few clear-headed and firm individuals, such as Abraham Lincoln, have insisted that the Government should.
The late Thomas A. Edison stated the matter this way: 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 * * * . It is absurd to say that our country can issue $30 million in bonds and not $30 million in currency. Both are promises to pay: but one promise fattens the usurer and the other helps the people.
However, it has long been one of the political facts of life that private banks must be allowed to create the lion’s share of the money, even if not all of the money. Thus there is little opposition to the Government’s printing bonds and then permitting the banks to create the money with which to buy those bonds; but proposals that the Government itself create the money instead of the bonds have always set off tremendous political upheavals. For example, Abraham Lincoln set off a political furor when he insisted upon having the Government issue $346 million in money (the so-called “greenbacks”) instead of issuing interest-bearing bonds and paying Interest on the money.
70. If the Government issued more money instead of Government bonds, isn’t there a danger that the Government would issue too much money and cause inflation? No. It is no more or no less inflationary for the private banks to create $1 billion of new money than it is for the Government to create $1 billion of new money. Furthermore, as an agency of the Government the Federal Reserve System, decides in any case the total amount of money to be created.
125. Do private banks enjoy a special relationship with the Federal Government? Yes, a very special relationship. The business of banks is to lend money. The profit comes from the difference between the cost of creating money and the price they charge borrowers for that money. Now the cost of creating money is negligible. Congress has delegated the power to create money to the banking system without a charge. The banks do not pay a license fee or a payment charge for their reserves. Thus the raw materials the banks use cost them nothing.
131. Do private banks perform a service in buying Government bonds? No, because they create money—an obligation of Government simply to buy bonds guaranteed by the Government. There is no risk involved, as there is in loans to businessmen and consumers. The banks’ traditional functions are to lend to private borrowers and assume the risks of creditors. Their reward for buying bonds with money they create is the “subsidized” profits they enjoy.
132. What Is the “burden” of U.S. Government bonds, held by the private banking system? The burden is the heavy bond interest payments, borne by the taxpayers, that go to private bankers when the same amount of money could be created by an agency of Government . Then the taxpayers would not bear this tremendous cost on Government bonds purchased with reserves given to the private bankers.
142. Must the money supply grow over the long haul? Economists unanimously agree that the stock of money will have to grow—probably at about the same rate as the economy—if economic growth is not to be stunted. Failure to provide adequate money will spawn an era marked by deep recessions, abortive recoveries, low investment high interest rates, and chronic unemployment. This long-pull need for adequate growth in the money stock is the first commandment for monetary policy—active or passive.
146. What were the lessons of World War II about economic policy? The main lesson was that our country need never again suffer from a prolonged depression like that of the 1930’s. During the war we had full employment and the economy produced gigantic quantities of goods. If we could maintain full employment in wartime why not in peacetime ! Only now our economy can produce goods to eliminate poverty, ignorance, and disease rather than goods or the destructive processes of war. The second lesson was that the Great Depression resulted from the failure of Government to recognize and assume its responsible role in the economy. This included the monetary aspect of Government policy.
149. What was the result of Federal Reserve “Independence”? In practical terms the result was to commence a long decade of progressively tighter money. Given its freedom, the Federal Reserve has instinctively chosen to tighten money at every conceivable opportunity. The fact that tight money is a shotgun weapon to be used only for broad economic effects did not deter the newly independent Federal Reserve from trying to aim at specific targets.
156. What is the main problem of the Federal Reserve System today? In a word, Federal Reserve independence. Congress and the people are faced with the issue: How can we bring money management under genuine public control in order to coordinate monetary with other public policies? The original intent of the Federal Reserve Act was to insure such control; that intent is still valid. Our Government must squarely face the challenge of recapturing the tiller of its money system.
157. In practical terms what is meant by Federal Reserve “Independence”? There are two sides to independence—one is economic, the other political. On the economic side, independence means that the Federal Reserve formulates and executes economic policy, using its monetary controls, without any necessary reference or coordination with the policies being followed by the other branches of the Government. This, of course, invites clashes between the Federal Reserve and other parts of the Government.
159. Would inflation result if the Federal Reserve were made responsible to the President or Congress, or made subject to an annual audit by the General Accounting Office? Not at all. The notion that the American people and their elected officials are inflation-minded runs contra to political realities. Inflation hurts not the wealthy but the low-and middle-income families who live on fixed incomes, the old with their modest pensions, all those who have set savings aside for their old and or their children’s education. These people make up a considerable part of our population.
164. Is the “trustee” notion of monetary policy alien to American democracy? Of course. The claim that the people do not know what is good for them, and therefore a small group of men should be given the power to make decisions and then to take action without being held accountable to the people is 100 percent undemocratic. The essence of democracy is that the people decide for themselves, through their elected officials, what is good or bad for them. Further, to give monetary control to a group like the Federal Reserve is to hand over enormous power unfettered by responsibility to anyone. In a democracy, especially the American form, the holders of power, all most without exception, are responsible to the people, through elected officials in the use of this power. The Federal Reserve’s ideas that they should be considered trustees rather than stewards runs counter to anything that Americans have believed about power and responsibility since the founding of the Republic.
165. Who favors Federal Reserve independence? The private banks who control the System, together with some allies—notably, Wall Street newspapers and other members of the financial community.
166. Has the Federal Reserve’s record since the accord demonstrated superiority in the management of our monetary system? On the contrary, the Federal Reserve’s persistent fear of a bogeyman “inflation” had led it to slow our economy’s growth and cause periodic recessions, and moreover to maintain “tight money” even during periods of recession and economic slowdown.
169. Are reforms needed in the Treasury? Yes. The system of selling U.S. Government securities through a small group of preferred dealers should be abolished. There is no reason to guarantee government bond dealers vast profits.
tomozope:How would getting rid of all legal tender laws get rid of the debt?
It's not my debt, is it yours? Anyhow its bound to collapse under its own weight, remember Zimbabwe? With no legal tender laws, different forms of money and types of banking would be able to compete. People will still be free to assume debt for their own profit or peril. Are you still driving that Yugo?
We are the soldiers for righteousnessAnd we are not sent here by the politicians you drink with - L. Dube, rip
bbnet:It's not my debt, is it yours?
But all this debt is created as a mortgage on all our property.
bbnet:Anyhow its bound to collapse under its own weight, remember Zimbabwe? With no legal tender laws, different forms of money and types of banking would be able to compete. People will still be free to assume debt for their own profit or peril. Are you still driving that Yugo?
Legal Tender creates NO DEBT in our system. Why are you so hung up on something that does not create a debt or bear interest?
Anyhow its bound to collapse under its own weight, remember Zimbabwe? bbnet
Yes I do and at the height of it's "hyper inflation" it's interest rate was 800% and the overnight lending was 10,000%. If you're only source of money was to borrow it, and you had to pay 800% interest how fast would you have to raise your prices to stay ahead of your beloved interest?
In the Wiemar Republic at the height of their "hyper inflation" the interest rate was 900%
Enjoy.
tomozope:all this debt is created as a mortgage on all our property
Who is the creditor and how will they collect their dues?
tomozope:Legal Tender creates NO DEBT in our system.
How would a FRN system evolve without them?
I'm enjoying god's gift of reason, avoiding as much self deception and denial that I can.
bbnet:Who is the creditor and how will they collect their dues?
The creditor is the bank, it's impossible for the people to pay the the principle plus the interest, so the people in time (look around) have to give up their property in payment of these debts. It's true that some of us can get out of debt but don't worry there is at least 4 other mortgages on your property that most people are 100% unaware of.
bbnet:How would a FRN system evolve without them?
Federal Reserve Notes system? If that is what you mean, we don't have a federal reserve note system, we have a debt money system. Fractional banking system all based on interest bearing debt. Those notes in your pocket are just a portable evidence of the interest bearing debt at the bank. There really isn't anything wrong with FRN's but there clearly is something wrong with how all the money is put into circulation so that way we can get them.
They should be replaced with U.S. Currency. Not U.S. Notes. Any monetary note is an evidence of debt, but FRN's aren't the debt themselves, nor are they redeemable in anything. They are not the true money in our system, bank credit is. What we should have is just plain old final payment issued into the system again, just as gold and silver was. Wasn't the country better when there was wealth money coming into circulation?
Maybe these two videos can help explain it further.
http://www.youtube.com/watch?v=86xFeK2h_bU
http://www.youtube.com/watch?v=LdVTQXA7M68
Good luck Tomo, when you make it outta chicago, look me up.
Here's a video that you might find intellectually stimulating?
http://vimeo.com/6790883
tomozope:What determins the value of a federal reserve note?
You do.
"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."
Esuric: tomozope:What determins the value of a federal reserve note? You do.
The number printed on it determins the value. Don't believe me pull out a $1, $5, and $10 and tell me the only difference between those bills that determins the value.
tomozope:The number printed on it determins the value. Don't believe me pull out a $1, $5, and $10 and tell me the only difference between those bills that determins the value.
The difference in value can be found within your own subjective value scales. You may not value them differently, and society may not value them differently, but this leads to an increase in prices, as your demand for cash holdings falls. OPEN A FUCKING BOOK ALREADY.
Esuric: tomozope:The number printed on it determins the value. Don't believe me pull out a $1, $5, and $10 and tell me the only difference between those bills that determins the value. The difference in value can be found within your own subjective value scales. You may not value them differently, and society may not value them differently, but this leads to an increase in prices, as your demand for cash holdings falls. OPEN A FUCKING BOOK ALREADY.
now you're talking about the value of goods and not the notes. the value of the notes is the number printed on it.
tomozope:but this leads to an increase in prices, as your demand for cash holdings falls.
why would i raise my prices if i didn't want/need as much cash? lol are you feeling ok?
tomozope: tomozope:but this leads to an increase in prices, as your demand for cash holdings falls. why would i raise my prices if i didn't want/need as much cash? lol are you feeling ok?
Esuric: tomozope: tomozope:but this leads to an increase in prices, as your demand for cash holdings falls. why would i raise my prices if i didn't want/need as much cash? lol are you feeling ok?
I lol'd
"A man’s time is always scarce." - Murray N. Rothbard
Never mind Mises money clips! Where are the Mises wheelbarrows?
ok, I think we just found the perfect ending to the thread. it won't get any better than this.
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
Matgre: Esuric: tomozope: tomozope:but this leads to an increase in prices, as your demand for cash holdings falls. why would i raise my prices if i didn't want/need as much cash? lol are you feeling ok? I lol'd
OK lets flip it around. I'm super short on funds, my demand for dollars is always going up and if I don't get more money i'm going to lose everything I own. The only logical thing to do is lower my prices. I'll cut them by 90% because that will solve all of my economic problems.....Matter of fact I visited this austrian website and they told me my problem is "too much money" whew! Thank god because all the balance sheets of america say otherwise.
Are you guys really stupid enough to believe that more money forces people to raise prices? The only thing that forces businesses to raise prices is when the 'cost of doing business' goes up.
I forget the only business you'll ever elevate yourself to is selling dope because you can't even do simple math, and you don't even understand that all we use for money is numbers. Did you even take a basic math class anywhere in your entire life?
I'm trolling, chillax
tomozope:Are you guys really stupid enough to believe that more money forces people to raise prices? The only thing that forces businesses to raise prices is when the 'cost of doing business' goes up.
Have you ever heard about the concept of inflation?
The more money you inject in the system, the more the general price level in the system rises, as the money trickles down in the economy. This is known as inflation. Now, if as a supplier, the prices of your factor inputs (cost of doing business) increase, then logically you will need to raise your prices as well.
Knight_of_BAAWA:Currently, we have frac-reserve fiat currency from a central bank. Remove all that and your objection goes away.
tomozope:Removing the central bank or the fiat currency(which doesn't exsist until the bank deposits do) still won't put any debt free money into circulation.
DrKrbyLuv:There seems to be a great deal of misunderstanding with respect to the mechanics of our money.
Matgre:I'm trolling, chillax
Matgre: Have you ever heard about the concept of inflation? The more money you inject in the system, the more the general price level in the system rises, as the money trickles down in the economy. This is known as inflation. Now, if as a supplier, the prices of your factor inputs (cost of doing business) increase, then logically you will need to raise your prices as well.
Here is an analogy I use with inflation. It's not complete, but it comes across to the low-information people...
Three kids were out exploring one day and came upon a discovery. Two boys each found a bag with $1000. The third boy found a large bag of candy. The kid with the candy is stuffing his face, and the other two are watching him, and eventually ask for a piece of candy.
The boy refuses.
Even though they know they can go all the way back to town and buy all the candy they want, they have an abundance of cash. It soon it is offered for a piece of candy.
He wants $20 dollars a piece, which the boys would normally find outrageous, but money is cheap, so they hand some over.
The boy also continues to eat candy because it is so delicious, and now there is only half a bag left, and the boy certainly can't sell pieces for only $20 dollars any more. He'll part with one piece for $50. Now money is becoming cheap to him too, and he certainly can't part with his diminishing supply of precious candy... not unless he fetches a premium.
With the candy all gone, and each boy with roughly the same amount of money, they by chance happen to meet Jane. Jane thinks $200 dollars is a fair price for a handjob, and the price of labor is set.
Tomozope.
Can you competently solve calculus problems without knowing order of operations?
tomozope:Gold used to be a form of money and because man combined his labor, raw resources of the eath and his knowledge under the 1792 coinage act all gold money came into exsistance as a wealth. You can still get gold and not go into debt if you own a gold mine but you cannot have that gold coined into money free of charge.
True, but one could offer the mint a percent of the gold as payment.
tomozope:ow all coinage stocks are delievered directly to the federal reserve system and delievered through the banking system by law. The only way you or I can purchase those gold coins is by someone going into debt to the bank then using that bank credit to purchase those coins. If you want to just purchase gold bullion with money, again, someone has to borrow that money first be it you or someone else.
Or one could trade a good or service for some gold coins. No borrowing necessary.
faber est suae quisque fortunae
Keith Ackermann: With the candy all gone, and each boy with roughly the same amount of money, they by chance happen to meet Jane. Jane thinks $200 dollars is a fair price for a handjob, and the price of labor is set.
ROFL
Matgre: Keith Ackermann: With the candy all gone, and each boy with roughly the same amount of money, they by chance happen to meet Jane. Jane thinks $200 dollars is a fair price for a handjob, and the price of labor is set. ROFL
This is clearly wrong. See Jane's Hand Job's are backed by Interest dept currency. Each time she gives a hand job a baby seal dies. Byron Dale has flown to the moon and back, would he lie!?
Knight_of_BAAWA:Removing both will, as there would have to be a sound currency to replace it. Please learn how to both read and do your own research. Please disabuse yourself of your idiotic money-as-debt crankishness.
I'm talking about having money as wealth. Maybe you should read this blog (from bottom to top) www.moneyaswealth.blogspot.com
Can you tell me what this "sound currency" will be, what it is made of, where it's going to come from, and how it's going to be put into circulation? Please tell the principles under which this currency will function.
Matgre: Have you ever heard about the concept of inflation?
Yes
Matgre:The more money you inject in the system, the more the general price level in the system rises, as the money trickles down in the economy.
That's simply not true. We don't have a general rise in prices, what we have is finished prices that rise faster than the wages and the cost of raw materials.
Matgre: Now, if as a supplier, the prices of your factor inputs (cost of doing business) increase, then logically you will need to raise your prices as well.
Now, if as a supplier, the prices of your factor inputs (cost of doing business) increase, then logically you will need to raise your prices as well.
The cost of doing business is interest and taxes. The only way taxes increase is when the government has to service a larger debt. The interest load generally increases when the business debt increases (well over 30 trillion now). Businesses shift their cost of doing business down either through lower wages, cheaper raw materials, or a higher finished price. We can all clearly see that is what has happened due to the mathematics of our monetary system. An increase in money does not create an increase in the cost of doing business, an increase in interest bearing debt does, and since the true money in our system is interest bearing debt, you can clearly see the effects. Are cars not made of less raw material, made cheaper with more effient tooling(less labor costs), and still cost more?
Is this not true for almost every product you've seen? What we have is a growing spread between the finished prices, labor costs and raw materials.
And besides if the wages and raw materials rised at the same rate as the finished goods who would care about inflation? You're hours of work would still purchase the same amount, instead of today where it takes 2 or 3 jobs to have the same standard of living that one bread winner could provide 50 years ago.
Knight_of_BAAWA:and your friends who not only bleat crank ideas from Zeitgeist
I'll say it again I've never watched zeitgeist and don't care to.
Keith Ackermann:He wants $20 dollars a piece, which the boys would normally find outrageous, but money is cheap, so they hand some over.
How was that money put into circulation?
Keith Ackermann:The boy also continues to eat candy because it is so delicious, and now there is only half a bag left, and the boy certainly can't sell pieces for only $20 dollars any more. He'll part with one piece for $50. Now money is becoming cheap to him too, and he certainly can't part with his diminishing supply of precious candy... not unless he fetches a premium.
If this kid has a monopoly on the creation of candy they he probably could charge what ever people were able/willing to pay, but the moment there is competition someone will undercut him in the business world.
Keith Ackermann:With the candy all gone, and each boy with roughly the same amount of money, they by chance happen to meet Jane. Jane thinks $200 dollars is a fair price for a handjob, and the price of labor is set.
The value of jane service cannot be determined by Jane alone. In order for value to be set two parties have to agree, then the value is it. That is just Janes asking price. Unless what you're saying is true I'm putting my house on the market for 500 million and someone will just have to pay that for it right? But where will they get the money? The same place all money is created, at the bank, when the create brand new loans.
filc: Tomozope. Can you competently solve calculus problems without knowing order of operations?
And you'll never understand anything about money until you clearly understand the effects of interest.
tomozope:I'm talking about having money as wealth.
And if you are unfamiliar with the workings of a gold standard, there are many excellent books you can read. Don't expect me to do your homework for you. Don't be lazy. Since you clearly have enough time to read the works of cranks, you should have enough time to read works about reality.
JackCuyler: tomozope:Gold used to be a form of money and because man combined his labor, raw resources of the eath and his knowledge under the 1792 coinage act all gold money came into exsistance as a wealth. You can still get gold and not go into debt if you own a gold mine but you cannot have that gold coined into money free of charge. True, but one could offer the mint a percent of the gold as payment.
Under the 1792 coinage act, anyone who brought silver to the mint could instantly pick up the coins by paying a premuim fee, if they wanted to wait until their bullion was weighed assesd, and turned into money they got to keep 100% of the fruits of their labor. Currently any coins minted by the Mint are delivered directly to the banking system and the only way you can get any of those coins is to have some check book money to purchase them with. Check book money (demand deposit) is only created via an extention of credit by a private commercial back (a debt). The only way you can move any coins into circulation is by someone purchasing those coins at face value. Coinage does not go onto the books of the government as a debt, but 100% of those coins go onto the people's books as a debt.
JackCuyler:Or one could trade a good or service for some gold coins. No borrowing necessary.
That may be true for privately minted coins but those are not money because they have not been monetized and are not money. No borrowed necessary and no money created either.
tomozope:... but the moment there is competition someone will undercut him in the business world.
Shame this couldn't apply to money since its not really a product, right?
Knight_of_BAAWA:And if you are unfamiliar with the workings of a gold standard, there are many excellent books you can read.
The reality is that we've never had a true gold standard in this country. The "gold standard" was just an act of deception by the banking system to make sure the people didn't realize that not only did their money switch in quanity (loaned out at a minimum 5 receipts for everyone 1 dollar of gold) and quality (from an evidence of wealth to an evidence of indebtiness).
bbnet:Shame this couldn't apply to money since its not really a product, right?
Debt money cannot compete with wealth money, but the banking system has a complete monopoly on the creatation of our general meduim of exchange as interest bearing loans. Wealth - vs - Debt. Freedom - vs - slavery. Honesty - vs - Fraud.
The only book of its kind that explains this is Modern Money Secrets.
Money has to be produced but it's not a "good". Money is just a tool to make barter simpler that should only be used to enhance fair trade.
tomozope:... the banking system has a complete monopoly on the creatation of our general meduim of exchange as interest bearing loans.
and elimination of legal tender laws would only reinforce their monopoly, right?
bbnet:and elimination of legal tender laws would only reinforce their monopoly, right?
It wouldn't affect anything at all because all the banks loan you is some numbers in a checking account. The legal tender is just a portable book keeping entry you can carry around.