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It hasn't imploded.
Them selves. You and I differ a bit here. If you were to print some extra money, cash, then give it to everyone, and everyone used it to retire their debts with. Then nothing bad happens.
Hi newonecoming2,
I agree as we discussed, but I am arguing within the confines of our credit based monetary system. I am trying to tell people how it works for many reasons including its absurdity. As I said, I am essentially a green backer. However no one seems to know what that means because they think that is already how its done. How can you tell anyone the merits of debt free money without showing them what we have now?
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Ex. I pay off my debt to you and you pay off your debt to him and he pays his debt to her then she pays off her back taxes, the economy doesn't implode. That extra cash gets redeposited into the bank and used as to make new loans with.
As I said, that would work. However a large deficit with tax holidays and rebates to the people would do the same thing so long as the Fed purchased the debt( profits are rebated to the treasury). Its as close to debt free money as this pig gets. But hey, if you can get the coin idea going, I am right behind you.
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What causes the economy to implode is the retirement of debt by default. Then people don't get their money back and so can't use it again.
Actually no. The money never makes it back to the bank. If I borrow money and never pay it back, the banks has to recoup it. If they don't then the money is out there. The problem is that it freezes new credit. It after all closes the banks because it has violated bank accounting rules and it declared insolvent. Its what makes them not a counterfeiter.
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If you print cash and give it to everyone and they use it to pay off their debts with everyone wins because the original holder of the money (debt) gets it back to start the cycle all over again.
What kills the system is the retirement of debt by default. The retirement of debt by repayment doesn't do jack to the system.
We often get bogged down on which system where you are arguing for the ideal. What I am pointing out is what they could do using this system and how they use people's ignorance to not solve the problem
. The problem newonecoming2 is they don't understand the problem. You are offering fine solutions, but no one knows the problem you are tying to solve. You have the solution against one of the most oppressive forces humanity has ever known, but nobody knows. Getting people to understand that their money is created as debt will get them to understand the problem. Then they will love your debt free money idea.
As far as ideals go, I am a green backer just like you.
It hasn't imploded.
Them selves. You and I differ a bit here. If you were to print some extra money, cash, then give it to everyone, and everyone used it to retire their debts with. Then nothing bad happens.
Ex. I pay off my debt to you and you pay off your debt to him and he pays his debt to her then she pays off her back taxes, the economy doesn't implode. That extra cash gets redeposited into the bank and used as to make new loans with.
What causes the economy to implode is the retirement of debt by default. Then people don't get their money back and so can't use it again.
If you print cash and give it to everyone and they use it to pay off their debts with everyone wins because the original holder of the money (debt) gets it back to start the cycle all over again.
What kills the system is the retirement of debt by default. The retirement of debt by repayment doesn't do jack to the system.
Japan's economy has stalled for 15 years. Imploded? No. It's just been limping along like we have for the past four.
If you pay off $100 of debt, then the bank turns around and loans $1000. You seriously think "nothing bad would happen" if we just shot up on $24 trillion dollars of stimulus juice?
The lost Decades - eh? So if there has been a so called Lost Decades, and they have been in recession for 20 years - that will mean rampant unemployment - much higher than Europe and US and there industries bankrupt, with a low GDP since they no natural resources to export
Unemployment Rate is 4.7% - Thats a good bit lower
Less Savings, and more Debt - I think they have more savings
Look at the top 10 List - Japan GDP compared to the size of population is the highest, higher than US, European Union and China.
127 Mil people with a GDP of 5,458,797, vs the US 300 Mil with GDP of 14,526,550, or the entire European Union with about 500 with GDP of 16,242,256.
The lost Decades - eh? So if there has been a so called Lost Decades, and they have been in recession for 20 years - that will mean rampant unemployment - much higher than Europe and US and there industries bankrupt, with a low GDP since they no natural resources to export
Unemployment Rate is 4.7% - Thats a good bit lower
Less Savings, and more Debt - I think they have more savings
Look at the top 10 List - Japan GDP compared to the size of population is the highest, higher than US, European Union and China.
127 Mil people with a GDP of 5,458,797, vs the US 300 Mil with GDP of 14,526,550, or the entire European Union with about 500 with GDP of 16,242,256.
The Question is - how come the Japanese can do it?
The question has been answered. The Japanese national debt is what they use as money. A dominant authority's debt is known as liquidity. The debt of the tribal chief is as good as money, and money is good. At least in this frame of reference.
As is, speaking of this country, the worst thing da guberment can do is balance the budget. The nightmarish scenario is:
1. Zero interest rates for cheap international speculation driving up asset prices
2. A balanced budget or deficits funneling money to support asset prices.
Otherwise we will have a restricted domestic money supply with the only new money coming back to us with bankers *ss wiping it first in dollar carry trade. Your pay check on Friday will stink of what bankers had for breakfast on Thursday like the Greek bond market.
Hence the 4 year nightmare and continuing.
Must be nice to have a banking system where you can have a rabble of stooges exercising their democratic rights against their own interests screaming balance the budget and jobs bill to teach people to farm with no water.
Ex. I pay off my debt to you and you pay off your debt to him and he pays his debt to her then she pays off her back taxes, the economy doesn't implode. That extra cash gets redeposited into the bank and used as to make new loans with.
As I said, that would work. However a large deficit with tax holidays and rebates to the people would do the same thing so long as the Fed purchased the debt( profits are rebated to the treasury). Its as close to debt free money as this pig gets. But hey, if you can get the coin idea going, I am right behind you.
Here is a thought experiment that explains how the debt based monetary system always has to grow in debt.
If you have a closed economy with one worker, one product and the worker consumes the product, and one owner. In order for the owner to make a profit the owner has to charge more for the product than he pays the worker to make the product. The owner has to loan the worker the difference in order for the worker to be able to buy the product. It is an ever expanding debt bubble that will periodically pop.
How you keep it from popping is you give the debtors the money to pay off their debts with and then take to money away from the people that loaned it out in the first place. You print (greenbacks) the money and then ask the banks to hold the newly printed money in reserve in the fed or in their vaults and not to loan it out again. As all debt is money this reduces the amount of debt without destroying the economy.
“What causes the economy to implode is the retirement of debt by default. Then people don't get their money back and so can't use it again.”-Me
“Actually no. The money never makes it back to the bank. If I borrow money and never pay it back, the banks has to recoup it. If they don't then the money is out there. The problem is that it freezes new credit. It after all closes the banks because it has violated bank accounting rules and it declared insolvent. Its what makes them not a counterfeiter.”- gwynedd1
When someone that loaned out some money says that the loan is bad and then writes the value of the loan down to zero then the loan is off the books. As all debt is money the debt (money) has been retired by default. You have said that the total amount of debt needs to keep growing in order to keep the system working. (I have illustrated the flaw in the monetary system with the one product economy.) If you retire the debt by repayment then all is good with the economic world. But in our economy you can't ever make, earn enough money to retire the debt by repayment. This is driven by the requirement to charge more for products than the cost of production. Or more explicitly you have to pay your workers less than you charge them for your product that you sell.
The only way out of this trap that I've seen is the printing of money and the holding it in reserve after it has been used to repay debts with.
Last edited by newonecoming2; 11-08-2011 at 11:46 AM..
Must be nice to have a banking system where you can have a rabble of stooges exercising their democratic rights against their own interests screaming balance the budget and jobs bill to teach people to farm with no water.
What you are describing doesn't close the underlying problem. The underlying problem is the profit margin. Deficit spending doesn't close the gap as sooner or later the debt catches up to you.
You are left with the repayment of the debt as I have described or writing it off as a loss. Bad debts = failed banks. Transfer the debt from privet to public and what you get is bad debts = hyper inflation.
This is why I say reduce the value of the debts by 50% with inflation and then run the debt mill in reverse with the printing press for a bit on top of it.
Japan's economy has stalled for 15 years. Imploded? No. It's just been limping along like we have for the past four.
Their economy is strong except for the popping housing bubble that they have. Ours is weak in comparison. We can't keep limping along like this for very much longer.
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Originally Posted by Malloric
If you pay off $100 of debt, then the bank turns around and loans $1000. You seriously think "nothing bad would happen" if we just shot up on $24 trillion dollars of stimulus juice?
If I hand you a debt repayment voucher that is only good for the repayment of debt. Then you pay off your creditors with it. They got the money that they loaned out from somewhere they use the debt repayment voucher to repay those debts. Fractional reserve in reverse. A $1k debt voucher will retire $10k worth of debt. At the end of it you have the banks put the debt voucher in the fed on reserve or they can use it to repay their debts with but not loan out again.
So ya having the total debt go down by repaying the debt doesn't do jack to the economy. It is when people default on their loans and get the debt retired by bankruptcy that the banks fail.
Here is a thought experiment that explains how the debt based monetary system always has to grow in debt.
If you have a closed economy with one worker, one product and the worker consumes the product, and one owner. In order for the owner to make a profit the owner has to charge more for the product than he pays the worker to make the product. The owner has to loan the worker the difference in order for the worker to be able to buy the product. It is an ever expanding debt bubble that will periodically pop.
How you keep it from popping is you give the debtors the money to pay off their debts with and then take to money away from the people that loaned it out in the first place. You print (greenbacks) the money and then ask the banks to hold the newly printed money in reserve in the fed or in their vaults and not to loan it out again. As all debt is money this reduces the amount of debt without destroying the economy.
Hi newonecoming2,
Using the semantics of a credit based monetary system:
The release valve is the national debt. When the FED buys debt and does not sell the notes, it new creates money in the system ,effectively debt free. Its true that someone's account must go up in debt. However as I said, the profits of interest for the FED, less expenses, is rebated to the treasury. A debt to a bank you own or control is self owed( I will agree that this control granted by congress is tenuous, but again the rebates do go to the treasury). The reason why our current budget deficit does not do this is because it went right back to the banks who don't make productive loans anymore. It made a tight loop in the driveway and never hit the road. They want to bid up asset prices and collect interest. They want us to borrow a million dollars to buy a rock and call it capital appreciation while we pay interest on it. It must go into the economy to shrink the relative asset prices with wage and productive capital inflation. There are lots of ways to remove the asset inflation overhead.
1. Distribute coins as we discussed.
2. Principle write downs.
3. Defaults and bankruptcy.
4. tax holidays and large deficits or rebates.
They all do one thing and that is to restore the economic surplus to labor and capital so that more money goes to education and new ideas. Now we just have enough for subsistence so that Bernanke can host a banker orgy.
None of these have been allowed to happen because no one steals a truck full of goods only to give them back.
The one thing you did point out to me is that a national debt does tend to redistribute wealth by creating an artificial store of value. I have not quite thought about those implications since relatively speaking they are minor.
The biggest problem I have with the system is no one understands it so they can actually use democracy against us. However you could run a credit system correctly, if you really wanted. Though one does need to see that the complicated facade is to do anything but run it correctly.
Obama left it to the banks when he said they should loan money. The only way banks will loan money is for an appreciating asset which will either not happen or will increase the costs of doing business. If the asset "appreciates" it will simply delay the point where we are now, no new loans and no new money, aka stagflation and/or depression. The 0 interest rate means stagflation was the choice.
Their economy is strong except for the popping housing bubble that they have. Ours is weak in comparison. We can't keep limping along like this for very much longer.
If I hand you a debt repayment voucher that is only good for the repayment of debt. Then you pay off your creditors with it. They got the money that they loaned out from somewhere they use the debt repayment voucher to repay those debts. Fractional reserve in reverse. A $1k debt voucher will retire $10k worth of debt. At the end of it you have the banks put the debt voucher in the fed on reserve or they can use it to repay their debts with but not loan out again.
So ya having the total debt go down by repaying the debt doesn't do jack to the economy. It is when people default on their loans and get the debt retired by bankruptcy that the banks fail.
So I take my voucherto the bank and pay off the last $25,000 of my student loans. The bank then does what? Takes the debt voucher to a reserve bank and cashes it in for $25,000. And then they go out and loan someone else $250,000 dollars to buy a house. Banks are in the business of loaning money, not sitting on $2.4 trillion of cash for no reason. Give them $2.4 trillion in cash and they'll turn around and do what banks do.
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