PDA

View Full Version : Money as debt?



EuropIan
25th December 07, 07:24 AM
Surfing around on the interwebs I found this 47minute animated documentary about what money really is.

-9050474362583451279


The tl;dw version is: Banks invent money by loaning us money, the only way to cover this is by loaning out more money. Also, some "banks contrl teh w0rld"-Conspiracism and "fools! We are all d00med" warnings.

I found it interesting and worth watching. I also have no idea to what degree this is true

SFGOON
25th December 07, 12:30 PM
It's quite true. But the system is highly regulated. It's called "reserve banking," and it allows there to be as much money in the economy as the market will tolerate. It's a good thing.

Sure makes me not give a shit about overdrafting my checking account, though.

Boyd
25th December 07, 02:16 PM
To the best of my knowledge, everything up until the kooky "potential solutions" segment near the end is true. Extremely interesting and informative, but I really don't see the need to get all up in arms. Am I really supposed to be outraged that the heads of international banking conglomerates make a lot of money?

EuropIan
25th December 07, 02:28 PM
. Am I really supposed to be outraged that the heads of international banking conglomerates make up a lot of money?
fixed


I don't know, it's working for now.


But what happens when the banks can't cover what they borrow? E.g. through an incredibly stupid idea, like subprime mortgages?

Riddeck
25th December 07, 02:29 PM
To the best of my knowledge, everything up until the kooky "potential solutions" segment near the end is true. Extremely interesting and informative, but I really don't see the need to get all up in arms. Am I really supposed to be outraged that the heads of international banking conglomerates make a lot of money?

Well..yes.

When corporations have more money, and more power than any one Government, they soon become the controllers of said Governments.

What the hell do you think is going on right now? It is not about the money anymore, it is about the power.

Cullion
25th December 07, 08:06 PM
It's quite true. But the system is highly regulated. It's called "reserve banking," and it allows there to be as much money in the economy as the market will tolerate.

It's actually called 'fractional reserve banking' and it is related to, but not the same as the concept this film is trying to badly explain which is 'fiat money'.

Essentially, no.

Money only became fiat money in most western countries in the early 20th century (it took longer in the US because your politicians understood it and fought it to a degree a bit longer than most other people).

In mediaeval europe the same thing was practiced by kings clipping the edges off of valuable-metal coinage to mint new coins in the hope nobody would notice the coins were getting smaller. This was called 'clippage'. That's the origin of the tradition that coins must have finely milled edges, so you could see that they haven't been 'clipped'.


It's a good thing.

No, it really isn't. Stop believing everything that Keynsians (from the left) and Monetarists (from the broken part of the right) tell you



Sure makes me not give a shit about overdrafting my checking account, though.

Ho ho ho, Santa's got a monetary treat in store for you in 2008.

Cullion
25th December 07, 08:11 PM
Fiat money is bad because it allows new money to be created arbitrarily. This is bad because it inflates the general price level over time, but the people who benefit are the people who get their hands on the new money first (so they can spend it at the beginning of the cycle of price inflation, to acquire assets).

In essence, the apparently 'steady and controlled' inflation of the money supply acts as a pump which tends to draw real wealth from the poor and middle class to the rich. And it isn't all that steady and controlled, as the reality of the current banking credit crunch is demonstrating.

...

there's a lot to explain here.

Essentially the US housing market and the current credit crunch are the ultimate end-result of this policy.

It's really not OK and it will hurt the poorest the mostest whatever Bernanke decides to do (he can either inflate, and make living costs rise faster than low-end wages and fixed-income pensions will, or he can allow the system to deflate and see mass bankruptcies which will mostly be amongst the poorest who took out loans based on temporarily artificially low interest rates which they were led to believe would be affordable 4eva.

I don't care how smart and altruistic you are or claim to be, Good King Cullion is never going to hand you a licence to counterfeit, for good historical and logical reasons.

Boyd
25th December 07, 08:13 PM
But any person with common sense is going to reflexively understand the intrinsic relationship between money and power, and with that in mind I still say it's a nonissue. Powerful banking families have been ludicrously wealthy and more powerful than the heads of state for centuries now, here and abroad. Look at the Medicis, the Rothschilds, or hell, really any non-dynastic banking organization. It doesn't matter. Why does this surprise anyone? Why does it strike any of us as immoral that the people working with massive amounts of money are going to want to be paid massive amounts of money?

I'm looking for something to be angry about, but I really can't see it except for the completely valid concerns about how sustainable this system is in light of exponentially increasing interest rates. I do agree the system needs fixing, but when it happens it's going to be through a series of incremental baby steps and not one bold stroke against the Gordian knot. I'm not an economist, but I think abruptly eliminating the source of 95% of our nation's economy might be, uh, bad.

Boyd
25th December 07, 08:15 PM
Cullion, are you setting us up for a big fat hug for the Gold Standard?

Cullion
25th December 07, 08:16 PM
To the best of my knowledge, everything up until the kooky "potential solutions" segment near the end is true. Extremely interesting and informative, but I really don't see the need to get all up in arms. Am I really supposed to be outraged that the heads of international banking conglomerates make a lot of money?


They key point is that system also makes people like you poorer over the long-term. Not because they are earning it from you in a voluntary exchange which provides something you need (that would actually make you richer rather than poorer), but because you are being stolen from in a clever and hard to pin-down way. Thankfully, I just pinned it down for you. Now make a New Year's resolution to arson-attack the headquarters of a fractional reserve banking institution.

Cullion
25th December 07, 08:17 PM
Cullion, are you setting us up for a big fat hug for the Gold Standard?

No. I don't see a particular reason why a single commodity should back a currency. I do think that it's a good idea that if you're going to issue promisary notes, that that they promise, well, a defined something.

Otherwise you'll just be giving people a right to counterfeit and hoping that if they have a degree from the right college that they won't get too silly with that power.

Oops.

US dollars used to say 'pay the bearer X amount of Gold'. When they reneged on that they started to say 'In God We Trust'. The irony would produce a bitter laugh if it hadn't led to a whole lot of really poor people getting shafted so hard.

Cullion
25th December 07, 08:18 PM
But any person with common sense is going to reflexively understand the intrinsic relationship between money and power, and with that in mind I still say it's a nonissue. Powerful banking families have been ludicrously wealthy and more powerful than the heads of state for centuries now, here and abroad. Look at the Medicis, the Rothschilds, or hell, really any non-dynastic banking organization. It doesn't matter. Why does this surprise anyone? Why does it strike any of us as immoral that the people working with massive amounts of money are going to want to be paid massive amounts of money?

I'm looking for something to be angry about, but I really can't see it except for the completely valid concerns about how sustainable this system is in light of exponentially increasing interest rates. I do agree the system needs fixing, but when it happens it's going to be through a series of incremental baby steps and not one bold stroke against the Gordian knot. I'm not an economist, but I think abruptly eliminating the source of 95% of our nation's economy might be, uh, bad.


I think there's a difference from becoming wealthy by selling stuff people want, and networking your way into government to such a degree that they legalise a subtle form of theft that hurts the poorest the most.

Cullion
25th December 07, 08:20 PM
BTW, Banks didn't invent Money. They invented fiat money.

EuropIan
25th December 07, 08:26 PM
I think it's interesting that you can make money by lying about you have money. I mean, it is effectively the most intricate and long lasting pyramid scheme conceived. I am actually willing to believe that it has come to be like this almost by accident and necesity.


But this gordian knot, as you put it, could very well tear itsself apart in all manner of grizzly ways. I'm sure there'll be another market crash, almost everyone will be poor. Then, people will realize that money is an abstract concept and invent themselves rich again.

Cullion
25th December 07, 08:31 PM
By accident? no. Not in the history of any central bank I know of in any major country in Europe or the Americas. Every fiat money central bank I know of was founded by merchants who extracted a licence to counterfeit (within certain guidelines) in return for helping a government out with a debt crisis.

Now, you could call these governmental financial crises 'accidents' or you could call them 'economic incompetence by representatives exploited by shrewder businessmen' or you could claim they were 'deliberate actions of officials bribed by those banking interests'.

I think the second option has the most evidence to support it.

Cullion
25th December 07, 08:33 PM
Then, people will realize that money is an abstract concept and invent themselves rich again.

Real wealth you can touch and enjoy does not come from printing more green IOU tickets or adding zeros to a balance on a computer. It comes from creative work in the service of customers willing to pay.

EuropIan
25th December 07, 08:44 PM
By accident?

Yes. A slow gradual accident.

The shift towards the emphasis of fiat money has been gradual. Not meticulously planned at its inception as a tool for world domination



Real wealth you can touch and enjoy does not come from printing more green IOU tickets or adding zeros to a balance on a computer. It comes from creative work in the service of customers willing to pay.

It's nice to want things.

Cullion
25th December 07, 09:00 PM
Yes. A slow gradual accident.

The shift towards the emphasis of fiat money has been gradual.

Nope, it's always occurred with a single law being signed into effect in each country where it has happened.



Not meticulously planned at its inception as a tool for world domination

I'm not talking about world domination. That's not because I don't think very rich ambitious people wouldn't like world domination, but because I can't prove it.

I can prove how each case of fiat money getting signed into effect occurred and what it's effects were though.

EuropIan
25th December 07, 09:06 PM
So when exactly did the worldwide shift form real to fictional money occur.

It's more a case of "damn we want some of that" rather than "haha we will control everything"

I'm saying the the huge amount of control the central banks have over 'sovereign nations' is an unintended side effect of this particular way of interpreting money.

Cullion
25th December 07, 09:15 PM
So when exactly did the worldwide shift form real to fictional money occur.

Depends on which country you're talking about. In Britain we did it because it was the only way our government could fund WWI. The US went part way at the beginning of the 20th century, and certain elements fought against this plan until the early 70s, when Nixon finally took the US off any kind of gold standard. (No, gold isn't a magic commodity that always perfectly substitutes for money, but it is a hard commodity which promising to repay your notes when demanded prevents you from arbitrarily printing more of them).



It's more a case of "damn we want some of that" rather than "haha we will control everything"

Neither, from our governments point of view it was a case of 'we've held out against that for a long time but shit, now we are in trouble'. Followed by lengthy govt. supported propaganda intended to stop people from being physically aggressive towards the new banking power's property and staff, and the govt. officials responsible for the final surrender.



I'm saying the the huge amount of control the central banks have over 'sovereign nations' is an unintended side effect of this particular way of interpreting money.

Forget that video. This isn't about some satanic crypto-ideology where they manipulate us into.. who knows what (add appropriate funky science fiction scenario). It's about international merchant cartels picking on our govts' moments of weakness (which they may or may not have helped bring about in each individual country's case) to get granted a licence to print money.

You're much too intelligent for me to have to explain to you why an ambitious entrepeneur would like to have a govt. licence to print money. There's no spooky 'end game'. These people just really like getting richer however they can get away with and they're also really intelligent and capable of long-term planning (which is how they got rich and powerful enough to be in a position to negotiate these deals in the first place).

But it's still a form of theft, so it should still be illegal.

Which part of my argument would you like me to demonstrate in greater historical detail?

Feel free to ask.

EuropIan
25th December 07, 09:26 PM
You really think I'm disagreeing with you?


Look, previously I was oblivious as to how money really worked. Now after seeing the video, however vague it may be, I feel that it is unfortunate that this is the system of choice, perhap the only system to choose really (for now, maybe we'll be less stupid in the future).

Cullion
25th December 07, 09:35 PM
The key point is that this wasn't a system of 'choice'. No public voted for it. It just occurred as a back-door deal in every major country I know of where it currently exists, and people have come to accept it as the status quo (with some assistance from disingenuous propaganda about the true cause, and what finally brought us out of, the 30s 'Great Depression').

'We' were never given a choice. This system is for one, the reason behind that housing boom we've all seen in most western countries. And it is also the reason behind the crash (already started in the US, still to come for much of Europe).

On longer timescales, it is also part of the reason why people in many 'advanced' economies have also been getting poorer for decades, relative to the price of many of the essential goods they actually need to live (as opposed to consumer trivia which has only become cheaper due to us opening up to asian markets whose cheapness has little to do with long-term central bank policy and everything to do with local living costs of the workforces that make them).

Ever wonder why 'inflation' rates don't seem that high, despite the fact that most of us will never be able to afford to own the same kind of home we grew up in (that our dads often afforded with less apparently 'prestigious' jobs) ?

Now you know. We've been quietly experiencing a form of serious inflation for decades that isn't counted in offical inflation measures (because they exclude various capital assets and are moderated down by the new influx of goods from Asia).

And it is a form of theft. Don't accept it.

I have to go to bed now.

Riddeck
26th December 07, 02:52 AM
But any person with common sense is going to reflexively understand the intrinsic relationship between money and power, and with that in mind I still say it's a nonissue. Powerful banking families have been ludicrously wealthy and more powerful than the heads of state for centuries now, here and abroad. Look at the Medicis, the Rothschilds, or hell, really any non-dynastic banking organization. It doesn't matter. Why does this surprise anyone? Why does it strike any of us as immoral that the people working with massive amounts of money are going to want to be paid massive amounts of money?



It is totally an issue, because these are the families funding all the other nonsense that ties into the 'one world Government' they have been planning (For years!).



Which part of my argument would you like me to demonstrate in greater historical detail?

Feel free to ask.

None. I think most your arguments are well thought out, and usually dead nuts on.


I just want you to tie it into the group of people trying for world Government, and the takeover of the U.S. and the rest of the world.

Boyd
26th December 07, 05:34 PM
Let's play the Devil's advocate here, stressing that I am in fact playing Devil's advocate and not attempting to passive-aggressively slide my contentious views into the matter, since I am fundamentally ignorant of this issue and macroeconomics in general.

In the past three weeks, I've heard isolated reportings of this long-known fact from presidential candidates, viral video websites, Sociocide, friends in real life, documentaries I stumbled upon on Youtube, and Eddie Fucking Bravo. Suppose a great movement begins to eliminate this system and, tomorrow, it's completely abolished. Say we castrate the current credit/debt system by, I dunno, outlawing usury and creating a purely cash-based economy backed up by God's Love. Say we eliminate fractional reserve banking in America (or worldwide if you prefer) and only permit banks to loan out money they physically. What repercussions are we looking at?

We've built a system that, while unfair, we've become acclimated to. I'd like to explore this from more angles, but I've got BJJ in a few minutes so forgive me if this is rushed, but let's look at it this way: Fractional reserve loans allow people to fund projects that may otherwise be impossible. Correct me if I'm wrong, but if the amount of money banks could lend was reduced by 1/9th, wouldn't that make fundraising for any project, public or private, significantly harder? Where would the money come from to start new businesses, construct buildings, and so on? Further, would eliminating the bank's power by a functional 90% cause catastrophic damage to the banks extending beyond pay cuts for the board of directors? Assuming what the video says is true and money as debt creates 95% of the American economy, wouldn't eliminating it have, uhh, bad effects?

Bad effects folks. I think I should just leave it at that and post again when I'm not in such a hurry.

Cullion
26th December 07, 05:57 PM
You're right, this has to be defused carefully.

The main effect of forcing the US federal reserve or the Bank of England back onto the gold standard overnight in a revolutionary brute-force manner would be a sudden dramatic increase in interest rates (actually, this new interest rate would simply represent the real state of balance between the real supply of credit and the demand for it). A lot of people would go broke, including a lot of vulnerable people.

I wouldn't want that to happen.

If I had to plan this, I'd start reducing government spending so that I'd have room to cut taxes without having to borrow more (financing govt. borrowing is one of the main reasons central banks were willingly given this monopoly on creating legal tender from nothing). Then I'd cut taxes, especially for the poorest.

In the UK, the Bank of England sets interest rates to meet a govt. set inflation target. The government also specifies the method by which inflation is calculated.

Once I had room for tax cuts I'd start changing the formula for inflation calculation back to include the various goods which have been rising in price the fastest (our govt. has been deliberately re-jigging the inflaton stats to make it look like there's been a lot less inflation than people really experience).

As the interest rates went up, I'd try and match the tax cuts so that the poorest and/or median average households were able to keep slightly ahead of the increase in their debt payments.

The point would be to incentivise people to get out of debt as fast as possible by letting the price of borrowing rise to the 'real' market level it would have under 'hard money', whilst giving them the means to do so by having them pay less tax.

This would piss off some corporate interests, and please some.

Once the population and the govt. had re-balanced their finances so that they were coping with the higher interest rates due to a lower debt burden, then we could officially go with hard money.

Interest rates eventually start going down in line with more 'real' savings becoming available in the market as the govt. and general population lost their appetite for being constantly in debt and started to save again. The whole point would be to try and get people back in the black.

I think the situation here a bit like getting an addict off of a drug. Cold Turkey could work, and it's fast, but in this analogy quite a percentage of the most vulnerable and unhealthy addicts would be at risk of dying (being bankrupted and having their homes repossessed). I don't really blame the poor working stiffs who borrowed too much (they were living in a controlled economy rigged to make consumer borrowing look much cheaper than it sustainably could be), and I don't want to see them suffer.

Cullion
26th December 07, 06:53 PM
I should clarify one point, the eventual elimination of fractional reserves and fiat money wouldn't mean 'no lending money for interest'. It would just mean that the interest rate charged was a real representaton of the amount of savings available to lend vs. the demand for borrowing.

Printing money from nowhere seems good because it artificially lowers interest rates. But it's unsustainable and it also causes inflation.