Thread: Money = debt...and why it is designed to fail

Originally Posted by Silverback

Originally Posted by thaimeme

And even precious metals aren't as solid as they were of yesteryear....

Understandable.

Originally they were you'd suppose the best way of carrying a large amount of cash in a small bundle.

Today though - perhaps money is starting to have its limits.

Farming/Food Production is a sure bet for your family and its future these days.

precious metals have no intrinsic value. You can't eat gold.
They are worth only as much as someone will offer in goods, services or cash t a given time which has always been variable.
just like a 10 dollar bill.

Originally Posted by The Ghost Of The Moog

if borrowing was capped - your house would fall in price, as property prices are merely a derivative of the cost of leverage, and somehow, I doubt you'd be smiling at that !

One of the best things about owning a home outright - is you and your family actually have a home.

May seem obvious, but having a roof over your head - whatever work you do or don't do - always, guaranteed and as you like it, gives you great freedom. and in turn the ability to live life as you choose.

If you forget about the money side, a solid home that can never be taken away from you is a huge life-changer - for the good.

^ BTW A history of sterling ( The UK Pound ) dates back 1200 years old when "sterlings" or silver pennies were the main currency in Anglo-Saxon kingdoms.

If you had 240 of them, you had one pound in weight in Silver

And the total impracticality of carrying around large amounts of metal led to the emergence of fiat currency. Even fiat has now evolved into "virtual" currency....which is where the entire system now rests.

BTW the inscription on the Bank of England fiat notes makes them in effect a form of "promissory note" The idea of issuing promissory notes backed by gold was actually started by the gold merchants....who later on discovered that they could still issue promissory notes without actually having the gold backing.....and so began the fractional reserve system which after much refinement became the modern banking system.

Credits and debits on balance sheets. Trade and commerce would not be able to function at anything like the levels we see without the facilities of banking and electronic transfer of virtual currency, mostly expressed in the form or US dollars when trading internationally. The world is looking for ways to change this arrangement, but there is way to go before it happens.

Pseudo refers to banks creating "fake" money....and then goes on to say that the fake money loan has to be paid back with "real" money, so the bank gets real money for fake money..... If all money is actually "debt" as he says, then what would the difference be between the fake money and the real money?

Here's the thing. If this "fake" money is taken down to the local car dealership, you can get a "real" car with it. Not a fake car...a real one. The dealership will now pay the manufacturer for the car with this fake money...and they in turn will pay the guys who built the car with the fake money......and then the guys who built the car will go out and buy TV's and all kinds of stuff with the fake money.....and so on.

The whole scenario fails to understand what money actually is.......and this has been the stumbling block right from the opening bell.

The use of fiat allowed the greatest expansion of trade and commerce in world history, and the emergence of the fractional reserve system allowed the greatest expansion of real wealth in history. The wealth being a product of the use of credit. The distribution of this wealth is another matter entirely.


During WW1 virtually all countries abandoned the gold standard except Britain. London remained the place where international trade was financed and facilitated.

Then the British were forced to go off the gold standard 1919 as a result of war debt. Merchants and traders lost big time and confidence in the pound was gone virtually overnight.

When the British re-established the gold standard in 1925 it was too late. The $US had replace sterling as the international trading currency and still holds that privileged position to this day. (the US economy had already eclipsed the British economy since about 1880 or so)

If banks and governments were only able to issue credit to the limits of their gold holdings for example....we would still be plodding along in the nineteenth or early 20th century. The idea that "money" had to be backed by something of "real value" was abandoned a long time ago.

Money and credit are simply tools to facilitate the production of goods and services and leads to the generation of actual real wealth. (ie. The money that allows a factory to be built is not wealth, but the factory that gets built by the use of the money does represents real wealth)

A great many of the household named companies we have today would not exist, and neither would a great many of the products and developments we take for granted these days..... and most people never give a second thought as to how all this came about because most people really have no idea how the system works or what money is, as opposed to the wealth it generates.

Originally Posted by boloa

Originally Posted by Neverna

Originally Posted by boloa

In the good old days of the Gold/Silver standard your money was worth a certain amount of precious metal.
Now days with the FIAT system of Banking your money is just a promise...a primise to pay what????.......In most case's nowdays it's a ounce of Bullshit

I promise to pay the bearer on demand the sum of five [xxx] pounds



From the Bank of England...

The words "I promise to pay the bearer on demand the sum of five [ten/twenty/fifty] pounds" date from long ago when our notes represented deposits of gold. At that time, a member of the public could exchange one of our banknotes for gold to the same value. For example, a £5 note could be exchanged for five gold coins, called sovereigns. But the value of the pound has not been linked to gold for many years, so the meaning of the promise to pay has changed. Exchange into gold is no longer possible and Bank of England notes can only be exchanged for other Bank of England notes of the same face value. Public trust in the pound is now maintained by the operation of monetary policy, the objective of which is price stability.

Bank of England | Banknotes | Frequently Asked Questions

Obviouly a typo as the 'i' and 'o' are next to each other

Here's a badge for you....well done

A Freudian guilt trip by yourself, boloa? I hadn't even noticed your typo until you posted your badge, so the badge belongs to you. All I was doing was highlighting the link between your comment and my post. Maybe that went over your head!!

Originally Posted by Neverna

A Freudian guilt trip by yourself, boloa? I hadn't even noticed your typo until you posted your badge, so the badge belongs to you

Thank you

Originally Posted by Necron99

Originally Posted by koman

Originally Posted by Neverna

^ Pseudo, I don't understand how "debts can never be repaid". If I lend you 1000 baht and you repay me 1000 baht or 1100 baht, the debt is paid, the same as if I borrow GBP1000 from a bank and repay the loan and the interest. I've done it before. I borrowed some money from a UK bank. I withdrew the borrowed money from the bank. I bought a car (paid cash). I repaid the loan plus the interest. I have no debts to that bank. It finished many years ago. Bank happy. Me happy. Finished. No debt.

Well FFS. of course that's exactly how it works. Pseudo keeps banging away about the banks not "creating interest"....and it's been explained just about every way possible but he still can't get his head around it.

It would seem likely that most of us have done the same thing with the same results and experience. How many people can buy a house or even a car without borrowing .....not too many...so not too many people would be able to own their house or have a car without taking on some temporary debt.

As far as countries never paying off their debts....that too is nonsense. The reason why debts remain is because countries, as well as corporations, tend to operate on a revolving line of credit type of arrangement. The debt is being paid off constantly, but also has new debt added on a regular basis as required, so the thing never reaches zero.

Clearly some countries and other large borrowers do a better job than others. Not a single bank note is printed in any of this activity. Credit and debit entries on a balance sheet.....and that's how whole nations great and small manage their economies as well as the world's largest and smallest corporations.

Pseudo is the only legal entity on the planet that has not used a bank apparently... How likely is that?.....

Psuedo's model is correct.
If you give work output no value.
What he is continually failing to factor in is the 10 in interest is a credit swap for his labour.


Now, given how he thinks his labour may well be worth nothing, that might be what is confusing him.

Necron its not a swap for labour because it still need to be paid back and nothing exists to pay it back with. If all the money in the world was put together and paid off all the debt there would still be a massive interest debt bubble. Simple fact

Originally Posted by beazalbob69

. All that tax money is going somewhere, but where?

It's not Rocket Science

Originally Posted by beazalbob69

Originally Posted by koman

The citizens demand more and more services from their governments at ever increasing cost and at each level, but they don't want to pay any more taxes.

Who are these citizens you speak of? What kind of extra services do they demand? Where I live mostly in Massachusetts the state has a hard time supplying the same basic services that they have always provided even though taxes go up every year. Basic infrastructure is not even kept up anymore. Roads that are pothole ridden worse that 3rd world countries. Highways with overgrown medians and breakdown lanes, looks like a mad max film. Bridges that are unsafe to drive over. Spotty garbage pickup, This winter pathetic snow control and removal (although it was a bad winter).

People who have worked their entire live in modest jobs for the same state barely able to survive the winter while at the same time losing SS benefits that they have had for years.

All of the people at the bottom have had to cutback so all at the top could collect more wealth and power. Pretty simple in my eyes, but then again I have seen it with my own eyes. It is not because citizens want even more from their Govt it is because they want what their taxes should be giving them but is not. All that tax money is going somewhere, but where?

Some states are in worse shape than others. I can't give you a blow by blow account of how each state got to where it is but this short article may help. I was specifically dealing with California in the comments I made....because it has the biggest debt challenge. Fortunately it also has a very big economy to deal with the challenge. All it needs is good governance, and time.

The problem in a nutshell, is that the damage is already done by years and years of poor fiscal management and in many cases reckless over spending. It's really that simple..

The solutions are painful for many people and likely to continue to be so for some time. Servicing these debts eats up a lot of tax dollars and if interest rates rise significantly it could get a good deal worse.

Living beyond ones means always brings consequences.....regardless if you are an individual, a city, state or country. A large amount of these state debts are in the form of unfunded pension liabilities for state employees. Unfunded pensions are very financially irresponsible in my view, and have caused problems in so many places. It should never be allowed....but there you have it...and they are still doing it. Pensions should always be properly funded instead of just relying on future tax revenues to pay for everything. That's what has happened and now the chickens have come home to roost in many cities and states.

I've bolded the last couple of lines, because they are a harsh reality that people in office need to come to terms with and get on with the job instead of passing the buck endlessly.

Aug 28 (Reuters) - America's 50 state governments owe $4.19 trillion, including outstanding bonds, unfunded pension commitments and budget gaps, according to a new report.

At $617.6 billion, California had by far the biggest total debt, more than twice the total of No. 2, New York, with $300.1 billion owed, according to State Budget Solutions, a research and non-partisan advocacy group.

Texas, with $287 billion owed, New Jersey, with $282.4 billion, and Illinois, with $271.1 billion, ranked next among states with the biggest total debt, according to State Budget Solutions. Vermont had the smallest debt load at $5.85 billion.

The annual study said state governments had benefited in the last year from smaller budget gaps and reductions in loans taken from the federal government during the worst of the Great Recession to pay unemployment claims.

Those trends helped reduce total debt, which includes medical insurance due retired government workers, from last year's $4.24 trillion of total debts owed by the 50 states, according to State Budget Solutions.

"Our states are in trouble and no amount of budget gimmicks, political posturing or hiding bills will fix the massive debt that they face," said Bob Williams, president of State Budget Solutions. "Drastic reforms, innovations and political courage are needed to put our states back on the road to fiscal survival."



I forgot one important thing. Again; it's not the size of the debt that is the critical factor; it more the ability of the economy to service it and control it's growth.

I urge anyone even vaguely interested in this topic to visit this website Could These 3 Simple Changes to Banking Fix the Economy?.

One of the many interesting insights it will provide is that uk banks, do not and afair, never hv operated on a fractional reserve system, they can literally create money, as much of that is guaranteed by the taxpayer, ie the heart of capitalism is subsidised, and charge interest on it. Does that benefit the average punter? Well read the website, it's very professional, and decide.

Originally Posted by longway

Could These 3 Simple Changes to Banking Fix the Economy?.

Thanks for the link.

http://www.positivemoney.org/

Here's a realistic view of Money=Debt

Debt slavery. Most whistleblowers say that their colleagues will not come forward because "dude, I have a mortgage, I need the job". First responders in NY were told that if they speak to the press about certain things they will get sacked and lose their pensions. Debt slavery. Comply or die.

Originally Posted by pseudolus

Debt slavery. Most whistleblowers say that their colleagues will not come forward because "dude, I have a mortgage, I need the job". First responders in NY were told that if they speak to the press about certain things they will get sacked and lose their pensions. Debt slavery. Comply or die.

Imagine the world if even 50% of the masses lived a nonconformist parody and simply practiced a solid resistance.

Jeff, google translate has that down as "playing golf". Is that what you meant?

Some of you guys might be interested in this:

Is this the Type of Recovery we Need? - Positive Money

In his annual budget speech yesterday, Chancellor George Osborne (the UK’s finance minister) declared that UK economy looks like to be in great shape, and that Britain is “walking tall again”. Jobs are being created, growth is on the up, living standards are improving, the national deficit (as a share of national income) has been halved, and ‘economic security’ is being prioritised.
Osborne has done a great job of spinning the statistics, and it can not be denied the economy is growing again. However, is this the type of growth Britain needs? Or does the current economic recovery mask a number of fundamental economic problems that could lead to yet another crisis?
A Debt Based Recovery

The Chancellor rightly pointed out that the UK has witnessed the fastest increase in GDP growth of all major economies. But what fuelled this recovery?
The Financial Times has noted that this can’t be explained by a growth in productivity. Indeed, productivity growth was stable for the 40 years before Chancellor Osborne came to power, and was ‘non-existent’ throughout his time as chancellor. This is hardly surprising: only 8% of the money created by banks goes to businesses to be invested in increasing their productive capacity.
Much was said about debt. According to the Chancellor, both private sector debt and national debt levels were soaring five years ago before he came to office. Apparently, both levels of debt are being reigned in and “The sun is starting to shine – and we are fixing the roof”.
It is spending or investment in the real economy that is required to fuel economic growth. Growth in spending or investment can be financed by running down savings or increasing household debt. Household savings have now fallen back down to levels seen just prior to the crisis, and business investment has been very low for the last half year. Indeed, much of the recovery has been fuelled by increases in debt.
The Office for Budget Responsibility, the public body responsible for economic forecasting, have forecasted that household debt levels will soon rise higher than their pre-crisis level. While mortgage lending has not reached pre-crisis levels, it is on the rise. More importantly, lending to households (excluding mortgages) is increasing at a rate £1-2 billion per month. With real incomes falling for the last six years, it is mainly household debt that is boosting the British economic recovery.
And what of national debt? The deficit (the amount the government borrows in one year) has fallen from £153 billion in 2009-2010 to £97.5 billion in 2013-2014. To a small extent this has been due to spending cuts, yet it has nothing to do with the increase in tax revenues that the Chancellor expected in 2010.
Assets & House Prices

Despite a small fall in house prices after 2008, the ever-growing housing bubble was never popped. Two of the biggest mortgage lenders suggested that house prices are now rising at the fastest rate since the crisis. The government perceives the value of property to be strongly linked with consumer spending, as well as increases in wealth and confidence, so they have created policies aimed at reflating house prices (such as the Help to Buy schemes).
Now households aged between 25-34 are being priced out of the housing market. Just 10 years ago, 60% of this age group owned their own property – while currently this figure crumbled to nearly 36%. Moreover, first-time buyers are twice as reliant on their parents for support for a deposit, compared to five years ago.
Jobs and Incomes

Since the coalition took office there are more people employed than ever before in Britain. Indeed, since 2008 the number of employed people has increased by about 1.1 million. Moreover, for the first time in six years real wages are apparently on the rise.
Yet the functioning and success of the labour market is somewhat more complex than the Chancellor suggests. For example, employment has increased mainly due to a massive increase in zero hour contracts and increases in self-employment (of the new jobs created since 2008, 732,000 were self-employed). Not only did the incomes of self-employed fall by 22% from 2012-2014, but around 80% of self-employed workers live in poverty.
Moreover, most of the increases in levels of employment were seen in the South of England- 10% since the Chancellor took office. On the other hand, while much was said about making return the North to a ‘Powerhouse’, spending on infrastructure in the North is £15 billion lower than when he took office.
Moreover, despite real wages showing somewhat of an increase in the last 6 months, this has very little to do with government policy and more to do with the low-levels of inflation (due to lower oil prices). Moreover, average real wages are still about 2% less than they were five years ago. Average real wages also masks the different income groups, where the top 10% have seen an increase in wages of 3.9%, while the other 90% have seen a decline of 2.4%.
A much better indicator, real median wages, shows that the earnings of most everyday Brits has been declining every year since 2008.
Inequality

Considering the increases in prices of assets, low levels of productivity, higher levels of household debt, and declining real wages, it is hardly surprising that inequality is also on the rise. Indeed, evidence from the Social Market Foundation demonstrates that the wealth of the highest earners, the top 20%, has increased by 57% since 2005, whereas the wealth of the poorest 20% has declined by 46%. Other research, by the Centre for Analysis of Social Exclusion at LSE shows that the richest 10% have increased their wealth by 46.5% since 2008. Finally, the financial times has noted that inter-generational inequality has steeply risen since 2010, where “Older households are the only groups with higher living standards than they had in 2010 and the biggest losses have been among the young.”
Is this the Recovery Britain needs?

With higher levels of inequality, stagnant productivity, an ever-increasing current account deficit and declining real wages, Britain is relying on debt to fuel growth and increase assets prices. While the complexity of economics makes it impossible to predict when exactly there will be another crisis, it is well known that when debt levels rise faster than productivity and income levels, the economy becomes much more vulnerable to economic shocks. While Britain may be walking tall at the moment, it’s walking on thin ice.