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Kent
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Video presentation that was well worth my time.

I have always understood (since I was an adult) that our current money supply is created out of thin air, yet I never thought about the implication that the existing money supply will never be adequate to pay back the interest required. As I understand the presentation, the existing system actually "requires" a certain percentage of the population to default on loans.

I like how it simplifies the history of banking. The concepts in this video are accessible to most college freshmen, which is why I dare post it here at Ornery! [Razz]

What interested me the most are the ideas for monetary reform. I went to the web site that produced the video MoneyAsDebt.net and was interested to see that Elizabeth Kucinich is a fan of the presentation.

The video quotes Benjamin Franklin as saying:
quote:
The inability of the Colonists to get power to issue their own money permanently out of the hands of George III and the international bankers was the PRIME reason for the Revolutionary War.
I don't see monetary reform becoming a Republican/Democrat issue, rather it will only become an issue when the world experiences the next depression. How can we bring up the developing world to our standard of living when the current system REQUIRES that poverty exist?

I see this as an issue that the left and right can both agree on needing to be dealt with ASAP!

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Jesse
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Almost enough to make folks consider Old Hickory a mixed bag, neh?
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Redskullvw
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jesse

Exactly. Money as a fiat currency has always seemed to me to be a bad idea as is the fact that we don't have a central bank that has a limit on what it can print into the currency supply.

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Jesse
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The Global Derivatives Market is currently valued at 516 Trillion dollars.

The GDP of every Nation on earth, added up, is just under 50 Trillion a year.

Churn and Burn.

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Kent
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Well, I am underwhelmed by the response. At this point I would even be happy if people talked about the animation used in the videos.
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Wayward Son
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quote:
The video quotes Benjamin Franklin as saying:
quote:
--------------------------------------------------------------------------------
The inability of the Colonists to get power to issue their own money permanently out of the hands of George III and the international bankers was the PRIME reason for the Revolutionary War.
--------------------------------------------------------------------------------


Although I haven't had a chance to watch the video yet (I'm at work, and at least try not to take too much time for Ornery [Wink] ), I do have a problem with this quote.

The United States did not issue it's own currency until well into the 1800s, as I recall from reading a (writer's [Embarrassed] ) book on the 1800s. People used English, Spanish, French or whatever currency they had at hand for transactions for the first few decades of our great nation. Some banks even issued their own currency! [Eek!]

So if issuing our own money was the "prime" reason for the revolution, why did it take us so long to issue a national currency?

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caladbolg1125
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quote:
So if issuing our own money was the "prime" reason for the revolution, why did it take us so long to issue a national currency?
If I remember my history correctly, when we finally got that power, we weren't really sure of the best way to use it. We expiremented with a few systems before we figured out that we need a national standard and couldn't let just any old bank print anything and call it money.
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Kent
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This is a good link that gives a timeline and explains thehistory of US currency.
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Jesse
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Coin was all most people really wanted, and we started minting it shortly after the Constitution.
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OceanRunner
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Kent - I watched that the other day with hubby, and it answered a lot of questions we'd had but had not learned the answers to previously. (I took Macroeconomics in college, not sure how I walked out of there without understanding this... but perhaps the teacher just thought it was too scary to teach us [Wink] )

I find it hard to imagine monetary reform happening anytime soon. How many Americans don't think about their personal finances enough to avoid crippling debt? Are they going to rally to change the way our economy functions?

Anyone want to start their own country and try this all over again...?

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kenmeer livermaile
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Kent: I dug the vid links. Thanx.
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Kent
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So, what I'm trying to understand is how our society would restructure itself with 0% interest loans from the government. Has anyone found any other "radical" monetary reforms that they find tenable?
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Colin JM0397
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This is a long book, but it reads quickly. Kent, you might want to pick up a copy: The Creature from Jekyll Island

You can also check out Mr. Griffin's website here: www.freedom-force.org

I'll check out the movie, but I'm pretty sure it's a summary of what's in the book. Fiat money, the perpetuation of debt, the privately held "Federal" Reserve, etc...

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Kent
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Thanks Colin, the book is at my local library. I'll be sure to check it out!
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flydye45
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Corrupt? Hmm. I've only seen the first in the series, and it seems pretty fair.

The problem from the corruption charge is that the system works. It is also semi-self regulating. Peter, feeling wealthy and able to afford a house by his contribution to the economy, applies for a loan. He is bringing the notice of "economic upgrade" i.e. his ability to buy a house, into the system and the system creates the cash which he is bringing into the system

When Paulette isn't feeling as economically rigorous, she makes her own cuts.

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Kent
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Flydye, watch the rest; the concern is not that it is so much corrupt as that it is unsustainable. We cannot continue this path without imploding the world economy.
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flydye45
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Then it sounds like a standard malthesian prediction, assuming static systems and a lack of corrections.

But I'll give it a watch.

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kenmeer livermaile
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Aye. Since money isn't real but only an extremely convincing consensual hallucination, so much so we make rules on how we share the dream, the system can be adjusted.

Of course, dreams tend to freak out whenever reality intrudes. Remember when we called 'em 'panics'?

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Getteur
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"Remember when we called 'em 'panics'?"
I doubt there is anyone alive today that was alive when they were called panics.
Remember when individual banks issued their own currencies?

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kenmeer livermaile
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Memory is not entirely predicated on personal experience of a phenomenon. That's why we have history.

*sigh* Remember how Nero played that fiddle?

Yee-HAW!

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flydye45
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"Memory is not entirely predicated on personal experience of a phenomenon. That's why we have history."

Well said.

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Redskullvw
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I actually watched the series. Its basic, skips a couple of points that explain monetary markets, but seems over all to be econ 101.
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Kent
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Red, do you agree that the time lag of repaying interest only delays the inevitable, or do you think that it is a sustainable system? (And when I say "system" I speak of the creation of money out of thin air and then charging interest for its use.)

[ December 13, 2007, 10:51 AM: Message edited by: Kent ]

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Kent
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(chirping crickets)
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kenmeer livermaile
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"Well said."

And you said there wasn't enough mud in this world [Wink]

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velcro
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If I understand, the danger is this:

I give out a loan by signing a paper (Vbucks) promising to give a pound of gold to the bearer. But I have no gold. So when someone presents the Vbucks to me, I can't pay him.

I didn't watch all the videos, so I may not have this right. If so, please let me know which video describes the fact that "We cannot continue this path without imploding the world economy."

At it's simplest level, the answer is that I have a piece of paper (promissory note) from the borrower, saying that they will pay me back the 1 pound of gold. I give this to the person who presents me with my note.

What's the problem? If there is large scale default, there is a problem, but that would be the case even if we had gold in the bank vaults.

And if I have a gold mine in my back yard, why is it implicitly more sustainable for me to go dig up some gold vs. print money? The only difference is the scarcity of gold. If I found a way to make gold from lead, gold would no longer be useful. If I create a system to make sure that paper dollars are controlled, then they are no worse than gold.

Finally, the video implies that Local Bank just makes up money, then gets paid interest for loaning it. That is false. The Federal Reserve creates money, which it loans to banks at interest. That interest, minus a very small percentage, goes to the Federal Government, i.e. pays for services for everyone in the country.

So where is the corruption?

I think I have the facts right. If you know of any factual errors, please let me know and I will try to verify them.

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Kent
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The third video in the series. The issue is not so much the need to get a commodity in return for the currency (gold in your example), it is the fact that the current economy REQUIRES debt in order to function and that there is not enough money in the pool to pay the interest and the principal back; creating the need for impovershed individuals. As I see it, the system institutionalizes poverty.
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velcro
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How does the current economy require debt? If nobody borrowed money, what would happen?

And why do you assume that borrowing money and poverty go hand in hand? Unwise debt creates poverty, but that is due to lack of wisdom, not due to the concept of debt.

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velcro
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I watched some of the video. They say that if you borrow $1000, the "bank" creates $1000 which is added to the money supply, but it does not create the extra $100 to pay the interest. It claims that the only way to get the $100 to pay the interest is to go back to the bank and borrow it.

What about people who deposit money in the banks and GET interest? That is money not created by borrowing, isn't it?

Back to my question, if nobody borrowed money, then the economy would work fine... as long as there was no inflation, and as long as the economy did not grow. But in a static system, there would be no problem.

If there is inflation or economic growth, more money is needed. As Kent proposed, you could just have 0% loans.

I don't know economics, but I think the Fed raises interest rates to control inflation. 0% loans would encourage inflation, I imagine by encouraging lots of borrowing, which means making lots of money, which makes the money we have worth less. Interest rates are the knob to fine tune the economy.

Can you think of a better way?

[ December 17, 2007, 10:26 PM: Message edited by: velcro ]

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kenmeer livermaile
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"What about people who deposit money in the banks and GET interest? That is money not created by borrowing, isn't it?"

YOu have noticed the difference between CD rates and interest rates?

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Getteur
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quote:
Originally posted by velcro:
I watched some of the video. They say that if you borrow $1000, the "bank" creates $1000 which is added to the money supply, but it does not create the extra $100 to pay the interest. It claims that the only way to get the $100 to pay the interest is to go back to the bank and borrow it.

No the bank does not create the $1000 spoecifically to loan it to you, but the $1000 was probably created through the fractional reserse system from money deposited by others.

Back to my question, if nobody borrowed money, then the economy would work fine... as long as there was no inflation, and as long as the economy did not grow. But in a static system, there would be no problem.

Not so. Borrowing money is how businesses are able to finance themselves, and how you are able to buy cars and houses.

If there is inflation or economic growth, more money is needed. As Kent proposed, you could just have 0% loans.

Inflation and growth are two different things.
Inflation is an increase in the money supply.
Economi growth in an increase in the production of goods and services.

I don't know economics, but I think the Fed raises interest rates to control inflation.

True--or in an effort to slow an overheated economy to curtail inflation before it begins.

0% loans would encourage inflation, I imagine by encouraging lots of borrowing, which means making lots of money, which makes the money we have worth less. Interest rates are the knob to fine tune the economy.

True.

Can you think of a better way?


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Getteur
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Can someone help me?
I just posted a reply to a previous post, but my responses showed up embedded with the quotes from the post to which I'm replying--as if my words were no different than those being quoted. What do I have to do to get them separated like your experienced posters do?

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DonaldD
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Edit the message (click on the paper and pencil icon above the post).

You will see the quote tags: [qu0te][/qu0te]. Everything between shows up as quoted. You just need to remove your text from between those tags and add it after the closing tag.

Thiis works the same for all binary tags (bold, italic, etc.)

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Colin JM0397
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0% - or any percent for that matter - loans only inflate the system as it is now under fractional reserve banking.

Under a system where, for example, that is illegal, then I need to have $100 to loan you $100. You earn money and pay me back, let's say $5, so now I have $105. There is another $5 available for new loans.

There would still be inflation, but it would be minute compared to what we have now.

As it stands now, when you pay back the bank, there's roughly $95 out of that $105 that never existed before, and with that $105 the bank can now loan out $1050.

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velcro
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I should have said that in a static system where nobody borrows money FROM THE FED, only from entities with cash, there is no problem, as long as the money supply is still worth the same (no inflation) and no additional money is needed (no growth).

Colin, I don't think you answered any of my questions.

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flydye45
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So if Greg defaults on a loan, does that mean that bank created money is destroyed?

What about market adjustments? If I invest $10,000 in Gizmo Inc, and it loses 10% of value, isn't that also a "destruction" of money, which removes some of the excess from the mix? Just on the surface that seems to be a perfectly valid.

I'm not an economist so I need some help here

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Colin JM0397
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We're making it more difficult than it is - something "they" count on.

It's all this simple: the banks create money electronically/on the books to loan to us. The money created is nothing more than the "asset" of the loan we take out. The "asset" of a loan on their books is what generates the money we borrow. IE the loan itself creates the money out of nothing, and it is backed by the hard asset we put up as collateral (house for example). When we pay it back the asset of the loan the bank holds is decreased by that amount of principle we pay. Hence why debt drives our economy. No debt = no assets held by the banks. It's a catch-22.

The interest is new money created by our labor - what we earn for our work and use to pay the bank.

quote:
What about people who deposit money in the banks and GET interest? That is money not created by borrowing, isn't it?

Back to my question, if nobody borrowed money, then the economy would work fine... as long as there was no inflation, and as long as the economy did not grow. But in a static system, there would be no problem.

Velcro, if you get interest, the bank is simply cutting you in on a portion of the interest they get from the debtors who are paying them. It's certainly not "real" money they created.

Perhaps you need to look at the movie again. We are a debt-driven system. As it stands now, if no one borrowed money, there would be no money in the system. Which is why we're staring down the barrel of some really rough times. A constriction of the monetary system as it is just beginning to happen now is no different than what happened during the Great Depression.

What's most disconcerting to those who understand the system, it is a manufactured crisis used to bring about change that certain power brokers across the world feel is necessary and best for them (under the guise of what's best for the people, of course)

I've said it before, I'll say it again. Say goodbye to the dollar in the next few years, and hello to the Amero.

Well... maybe not few years, but I'll wager less than 10. When they depress the overall system enough, the people will demand it.

[ December 19, 2007, 10:55 AM: Message edited by: Colin JM0397 ]

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Getteur
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"So if Greg defaults on a loan, does that mean that bank created money is destroyed?"

Yes, but...
It is shown on the bank's P&L statement under losses as bad loans and deducted from the bank's profits. I suppose that's why having borrowers default on loans are not that big a deal to lending institutions and credit card companies.

They create money, lose the created money they never had in the first place, then write off the money they never had against taxable income.

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velcro
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Colin wrote
quote:
The interest is new money created by our labor - what we earn for our work and use to pay the bank.
But I thought only loans create money - which is it, only loans, or loans and our labor?

quote:
As it stands now, if no one borrowed money, there would be no money in the system.
Imagine our system today. I have cash in my wallet. I have electrical money in my bank account. If everyone stopped getting mortgages from banks (borrowed money from parents instead) and businesses got money from investors' savings accounts instead of banks, and everyone paid off their credit card balances every month, there would be no more borrowing money.

How, exactly, would that state of affairs result in NO MONEY in the system? If a bank closes it's loan department, does it mean all the deposits are worthless?

It can't be as simple as you claim and still be right.

I think it is true that loans that originate from the Fed create money, which is necessary for a growing economy. It's like the Fed keeps adding rooms for a growing family. If the Fed stopped loaning money, it would be harder for the economy to function, but to say that there would be "no money in the system" is wrong. To continue the analogy, the rooms would get crowded, but the house would not disappear.

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velcro
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I really want to know. How does eliminating loans destroy the cash in my pocket and the balance in my checking account?
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