There are many a true saying!

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For example – You cannot put a square peg into a round hole. You cannot get a quart into a pint pot, so what about, you cannot repay a £ 97 debt when you only have £3 in your pocket.

Would anyone argue with the logic behind those sayings?

If not then why is it that government ministers fail to understand simple logic?

Is it that they do not understand that 97% of the money in circulation is debt?

Do they not understand that our total debts are greater than the total amount of money we actually have to repay those debts?

Do they not understand that even the taxes they take from us, is money that somebody somewhere has had to borrow?

Is it not time that they came down from the economic clouds and looked at the very basics making up our economy?

The facts reveal that over the years Britain’s economy has been running on an ever increasing volume of debt, to a point where the safety limit has been well and truly exceeded.

Do they not understand, and can they not accept, there is only one way back and that is through radical changes to our financial system?

Why is it that no-one in government or in the Treasury will answer two straight forward questions?

1.         Why is it acceptable for commercial banks to create money that did not previously exist, out of thin air, but not acceptable for the Bank of England to create that same money, not as a debt, but as a credit?

2.         When debt it is what funds the economy, can they explain how you grow the economy whilst cutting debt? 

Answer those questions and you are on the way to solving Britain’s financial problems.

My bet is they will continue the struggle to fit the square peg into the round hole while trying to get a quart out of a pint pot.

What do you think?

 

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  • mens

    Where did you get that £2.1b money figure from? What do you mean by “money”?

    I’m pretty sure almost all money in the UK (98%) is lending (debt), that’s how an elastic money system works. The money supply is increased when we borrow, the debt IS the money, they are THE SAME THING. The debt is NOT created out of thin air but based on future cash flows. This is called Horizontal Money Creation.

    Therefore paying off all the debt would be a catastrophe because by definition we’d be left with the 2% … and that 2% came from ??

    The Bank of England, yes the BoE DOES create money – Vertical Money Creation – when it rolls it’s printing presses or does Q.E.

    • Simon

      If all the banks create new loans roughly at the same rate we get more debt, more deposits, and an increase in the money supply (inflation, boom, house price increases). When loans are re-paid faster than new ones are created, we get a reduction in the money supply (recession, unemployment). What do you mean by “the debt is based on future cash flows”? Is this what Northern Rock was trying to do when they hugely increased their lending, in other words they thought the people who took a mortgage with them could suddenly pay 8 times their salary for a house, when the historic norm was about 3 times ? I loathe terms like horizontal and vertical money creation, it seems to make things overly complicated, and probably written from an economist’s point of view rather than an engineer’s.

    • Peter

      I now think the equation may be:

      DEBT (£2.4tn) = PRINCIPLE (money £2,1tn) + INTEREST (300bn)

      The money (the stuff we can actually spend) is the “principle”.

      I too thought that money & debt were the same – but thinking further – the only way in which the 2.1 & 2.4 figures work – would be in the above equation. And it sort of makes sense. I don’t yet know, though, whether this equation applies over a time period (eg 1 yr) or whether it represents a snap-shot in time. Probably the latter.

      • Peter

        Another thing I don’t understand is the relationship between Asset values & Debt.

        In the video “The Consequences of Debt-Based Money” Ben Dyson quotes figures of there being approx 22million houses & the average house price being approx £188,000. This means that as far houses are concerned, the total asset value in the UK is something like:

        22million x £188,000 = £4.136trillion (say £4.1tn)

        So we have Asset value (£4.1tn) = Debt (£2.4tn) + something (£1.7tn)

        Is the “something” called “equity”? And “what is it”? Does it actually mean anything?

        • Simon

          8.6 million homes in the UK have no mortgage on them, including mine, so that is a fair chunk of equity. 9.7 million homes have a mortgage. My home is worth about £110,000 if I sold it and could realise the cash, but the main benefit for me is I can live there, rent and mortgage free. Younger people tend not to be so lucky as many have a huge mortgage or rent burden, especially in the South.

    • Peter

      I think the £2.1tn money figure came from the Bank of England’s statistics database. If you go to the Bank of England website & select “Statistics”, then “Interactive Database” – and then search for LPQAUYN LPQVQJM in the “Search the Statistical Interactive Database” box top right corner – this will give the quarterly figures for M4 Money & M4 Lending (ie debt).

      It can give figures from 1963 to the present day. Dec 2011 shows figures of M4=£2.080604tn & M4 Lending = £2.363243tn. These numbers are close the the £2.1tn & £2.4tn numbers as quoted in the article.

      If you search for LPQVQJO in the interactive database – this will give the quarterly results for the quantity of notes & coins in circulation (from 1982 onwards). Dec 2011 figure for coins & notes is £0.053402tn.

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  • Peter

    I too would like to know where the two figures came from ie the “£2.1trillion uk money supply” and the “£2.4trillion uk debt”. I thought in the present system money was debt (or at least 97% of it). By my reckoning with the figures I have found, the money supply in this country is approx £2.4trillion and only 3% (= £72billion) of this is coins & notes produced by the Bank of England.

    I interpret debt as a future cash flow (to the bank) – not that I’ve heard it expressed that way before. If I go to the bank & ask for a £100,000 mortgage & the bank agrees, then the bank creates £100,000 in my account. It doesn’t lend me someone else’s money – it more or less creates the full £100,000. I then pay the bank the £100,000 plus interest over time. This paying back the “£100,000 plus interest” in installments over time is a future cash flow to the bank. I have become a “cash” generator for the bank (and also I suppose to the system).

    Some people say that the banks create money out of thin air when they supply loans. That maybe one way to look at it. Another way would be to say that when I go to the bank to “borrow” money, I am effectively promising to pay them money (“loan” + interest) over time. The bank then “monetizes” my promise to pay. So it could be interpreted that it is my promise to pay has created the money & the bank has made that possible by converting my promise into money.

    Something, however, has gone seriously amiss. I am sure there must have been a time when the average house cost something like three times the average salary. Nowadays, however, it’s more like the average house costing something like 8 or 9 times the average salary. People have been increasingly pushed or encouraged to make promises they cannot keep – to the point now when the system is starting to collapse.

    Anyway – coming back to the original point – I would be grateful if the author (or anyone else for that matter) could explain his figures please.

  • Peter

    I too would like to know where the two figures came from ie the “£2.1trillion uk money supply” and the “£2.4trillion uk debt”. I thought in the present system money was debt (or at least 97% of it). By my reckoning with the figures I have found, the money supply in this country is approx £2.4trillion and only 3% (= £72billion) of this is coins & notes produced by the Bank of England.

    I interpret debt as a future cash flow (to the bank) – not that I’ve heard it expressed that way before. If I go to the bank & ask for a £100,000 mortgage & the bank agrees, then the bank creates £100,000 in my account. It doesn’t lend me someone else’s money – it more or less creates the full £100,000. I then pay the bank the £100,000 plus interest over time. This paying back the “£100,000 plus interest” in installments over time is a future cash flow to the bank. I have become a “cash” generator for the bank (and also I suppose to the system).

    Some people say that the banks create money out of thin air when they supply loans. That maybe one way to look at it. Another way would be to say that when I go to the bank to “borrow” money, I am effectively promising to pay them money (“loan” + interest) over time. The bank then “monetizes” my promise to pay. So it could be interpreted that it is my promise to pay has created the money & the bank has made that possible by converting my promise into money.

    Something, however, has gone seriously amiss. I am sure there must have been a time when the average house cost something like three times the average salary. Nowadays, however, it’s more like the average house costing something like 8 or 9 times the average salary. People have been increasingly pushed or encouraged to make promises they cannot keep – to the point now when the system is starting to collapse.

    Anyway – coming back to the original point – I would be grateful if the author (or anyone else for that matter) could explain his figures please.

  • Peter

    I have re-read the article above & whilst I’m still unclear about the initial figures of £2.1trillion & £2.4trillion, I agree with the general gist of it & it does astound me that the politicians “in charge” do not seem to have a clue about all this. They come out with platitudes of us having to tighten our belts & there not being enough money around – also to the point when Cameron almost blamed the public for foolishly borrowing too much money as being the reason why we’re in the mess we are now! To a point – he is right – people did borrow too much – but they were definitely encouraged to do so. Does anyone remember self certification mortgages?

    “When debt it is what funds the economy, can they explain how you grow the economy whilst cutting debt?” – that’s a question I have asked my MP. I am awaiting her reply.

    “Why is it acceptable for commercial banks to create money that did not previously exist, out of thin air, but not acceptable for the Bank of England to create that same money, not as a debt, but as a credit?” – that’s an interesting question. In my previous response below, I said that banks monetize peoples promises to pay as opposed to creating money out of thin air. The money that’s created is backed by peoples’ promises. The banks charge interest on the money generated for that service.

    So – why can’t the Bank of England create money as credit instead of debt? Indeed why not? Guernsey has been something similar to this for some time & they don’t have a national debt. Why should money be created as a debt laden promise if it can be instead be created as a debt free credit for what needs to be done. An acknowledgment of people’s worth. Debt free money could be created & injected into the economy – provided it does not cause inflation. The mere act of creating money this way does not necessarily lead to inflation – creating too much, though, would do so. A close eye would need to be kept on inflation. And that inflation figure would need to include housing costs.

    I am starting to wonder if it is the banks charging interest on the the money they “lend” that actually causes inflation in the first place!

  • Peter

    I have re-read the article above & whilst I’m still unclear about the initial figures of £2.1trillion & £2.4trillion, I agree with the general gist of it & it does astound me that the politicians “in charge” do not seem to have a clue about all this. They come out with platitudes of us having to tighten our belts & there not being enough money around – also to the point when Cameron almost blamed the public for foolishly borrowing too much money as being the reason why we’re in the mess we are now! To a point – he is right – people did borrow too much – but they were definitely encouraged to do so. Does anyone remember self certification mortgages?

    “When debt it is what funds the economy, can they explain how you grow the economy whilst cutting debt?” – that’s a question I have asked my MP. I am awaiting her reply.

    “Why is it acceptable for commercial banks to create money that did not previously exist, out of thin air, but not acceptable for the Bank of England to create that same money, not as a debt, but as a credit?” – that’s an interesting question. In my previous response below, I said that banks monetize peoples promises to pay as opposed to creating money out of thin air. The money that’s created is backed by peoples’ promises. The banks charge interest on the money generated for that service.

    So – why can’t the Bank of England create money as credit instead of debt? Indeed why not? Guernsey has been something similar to this for some time & they don’t have a national debt. Why should money be created as a debt laden promise if it can be instead be created as a debt free credit for what needs to be done. An acknowledgment of people’s worth. Debt free money could be created & injected into the economy – provided it does not cause inflation. The mere act of creating money this way does not necessarily lead to inflation – creating too much, though, would do so. A close eye would need to be kept on inflation. And that inflation figure would need to include housing costs.

    I am starting to wonder if it is the banks charging interest on the the money they “lend” that actually causes inflation in the first place!

  • chefdave5

    The problem isn’t that there’s more debt than money, there’s actually more money than debt!

    The banks collapsed because the debt/asset side of their balance sheets deteriorated in comparison to the money/liability side, they had a whole heap of money they owed and debts to back it more.

    When there’s too much money and not enough debt bankruptcy is inevitable. I believe the author needs to question his core assuptions.

    • chefdave5

      *they had a whole heap of money they owed and no debt to back it up*

    • Peter

      Is there a difference between money & debt? I thought under the present system money was debt. Is there truly a difference between the two? Do they exist as separate entities? I would like to know – for it would clarify / change my understanding of the present system. If they exist as separate entities – then there would indeed be perhaps 2 figures – one being the “£2.1trillion of money” & the other being the “£2.4trillion of debt”.

      My understanding is that there is £2.4trillion of money in this country of which only 3% (= £72billion) is in the form of notes & coins. The other 97% (=£2.328triilion) is in the form of debt – ie cash flows from people paying their mortgages & other loans etc: or perhaps, rather “peoples’ promises to pay”.

      If I take out a “loan” for £10,000 – & the bank agrees – then the bank creates £10,000 in my account. The bank monetizes my “promise to pay” – ie turns my promise into money. I buy whatever I wish with the £10,000 & then pay to the bank “£10,000 plus interest” in installments over time. My “promising to pay £10,000 (+ interest)” is then an extra £10,000 that has been added to the system (ie the money supply). I have become a cash generator – the money added to the system represents my future effort put into the system through work (or however I generate the money to pay back). As such I – or rather the £10,000 + interest I’m now responsible to pay back – has become an asset to the bank.

      Does money exist separate from debt?

    • DozyHole

      I think the article is referring to the fact that if you count the interest as well as the principle then as a nation we could pay down all our debts, even hand over all our cash and coins and still be indebted to the banks.

      Take interest out of the equation then surly you do indeed have more money than debt, since debt is money, plus the cash and coins.

      I also agree about what you say about too much money backed up by a deflating housing market. It is of vital importance that house prices are propped up no matter what the cost to savers or anyone else who stands to lose out, these are the silent victims of the financial crisis. If house prices fall then it’s the money in our bank accounts that is then illegitimate, not a nice thought.

      This is why it is vital that we break the link of money-debt as much as possible. Even if you don’t agree with the positive money solution, it’s surly obvious that they have identified the problem, which surprisingly many economists have failed to do.

    • DozyHole

      I think the article is referring to the fact that if you count the interest as well as the principle then as a nation we could pay down all our debts, even hand over all our cash and coins and still be indebted to the banks.

      Take interest out of the equation then surly you do indeed have more money than debt, since debt is money, plus the cash and coins.

      I also agree about what you say about too much money backed up by a deflating housing market. It is of vital importance that house prices are propped up no matter what the cost to savers or anyone else who stands to lose out, these are the silent victims of the financial crisis. If house prices fall then it’s the money in our bank accounts that is then illegitimate, not a nice thought.

      This is why it is vital that we break the link of money-debt as much as possible. Even if you don’t agree with the positive money solution, it’s surly obvious that they have identified the problem, which surprisingly many economists have failed to do.

  • Leo

    See if these make sense to you guys:
    1. Inflation is created with the advent of a loan because Debt = Principal + Interest. The interest amount is the inflation of the actual money supply. So when economists talk about inflation, they are talking the amount of debt to be repaid versus the amount of existing money supply circulating in the economy. They know that those debts can never be repaid by the economy at the macro level. And that causes a chain reaction down to the micro level, which is the household. So they say stop borrowing, which we should be doing. Never ever borrow from the bank.
    2. On top on those inflated debt due to the interest charges, banks are trading those debts as commodities amongst themselves (called derivatives or whatnot). So the inflated debts get inflated further. You can see economic activities around you but know that they are all financed by debts. Is that good? In the end, someone will need to go bankcrupt. It’s inevitable under the current monetary system.
    3. And remember this, every time a loan is repaid, a piece of the economy is taken away from it by the bankers. Example, collectively the economy borrows 100 billion from the banks but they repay the banks 100 billion plus 5 billion in interest charges. So over time, the economy will inevitably run out of money. One day, we will all be baked and naked.
    4.The existing monetary system is fraudulent and it is so by design. This is why the major religions of the world prohibit usury, which is interest. So the fraud continues. Why? Because the agenda is to enslave humankind. The government is not working for the benefit of the people. Wake up! They are part of the elite group so steep in greed and evil power. Again, wake up!
    5. Monetary supply is categorized into M1,M2, M3, etc. Google them. M1 refers to the amount of actual money in the economy. In 2011, M1 in Malaysia was 300 billion units while M3 was 1.2 trillion units of currency. The difference is due to the fractional reserve banking system and interest charges. Can 300 billion of cash money repay 1.3 trillion of debts? Someone is going under everyday – everywhere in the world – unless they borrow more.
    6. Last but not least, look around you. Is the political, economic, monetary or the social system working out to the people’s benefit? Big NO. Why is it so? Think for yourself and stop listening to the politicians. It’s time to be honest with ourselves. Our views of the world are shaped by our wishful thinking mindset. We are blind to the facts and truth because of that.

    • DozyHole

      It is not the interest that inflates the money supply, it is the principle. The simultaneous creation of a bank deposit and its corresponding debt. You must pay the interest by earning existing money.

      Depending on the amount of interest, and growth levels in the economy, it is mathematically possible to cover the interest payments since the same money can be earned and re-earned. But how much interest is too much and how much growth do we need to cover it without negative affects? I would agree with you that it is too much debt, and it is has negative effects for our economy.

      I don’t agree that it is some grand plan of our bankers and politicians to enslave us all, although to a point that does not matter because it is what is happening(and has been for some time) all around the world. People are simple creatures, if something is beneficial to us then we will keep doing it, this simple explanation is more convincing that the ‘grand plan’ thesis in my opinion.

      • Leo

        Thanks for the reply :)
        Money supply (or principal) never gets inflated. In fact, money supply gets shrinked by the minute due to the interest that needs to be paid. It’s the debt that is being inflated by the introduction of the interest charges.

        Central bankers and their agents (commercial banks) cannot charge interest on fiat money loans because fiat money is printed, not earned. Lending money is not a commercial transaction but it is only believed to be so (read: propaganda).

        Also, the principal that is being created by the central bankers (speaking at the macro level) will eventually be destroyed (taken out of circulation) when the debt is repaid. But, the interest earned on that principal remains as part of the fiat money circulation. That’s the profit of the central bankers.

        So it does not matter how much money is being loaned into the economy because it will be returned to the lender eventually. The problem lies within the interest payments which should not have been charged to the borrower because the central bankers creates (print) money out of thin air. There is no equal consideration for this.

        You can profit from trade (because tthere is equal consideration) but you cannot profit from lending because the debt will always be greater than the principal (no equal consideration).

        • DozyHole

          I would argue that it does matter how much money is loaned into the economy and what it is created for. If loans(and money) are made for non productive ventures such as speculation then it devalues everyone’s money, also, something that is often missed is the fact that money is sometimes only borrowed because it is scarce in the first place, this balance needs to be re-addressed in my opinion.

          I still think you are mistaken, money is created the moment a loan is drawn down, as long as all the banks all move in step. Even at 0% interest, money would still be created, inflating the money supply. Although you state correctly that the money is destroyed and taken out of circulation, this does not make it all fine, far from it.

          I will concede that if interest did not exist then we might not have a problem, no one would really benefit from inflating the money supply, so I think I can see where you are coming from. Abolishing interest would be very difficult, even more so than 100% ‘positive’ money.

          • Peter

            DozyHole – I was interested in your earlier reply to Leo. My understanding of the present system is that the money supply is increased whenever a new “loan” or mortgage is authorized. As you said “It is not the interest that inflates the money supply, it is the principle. The simultaneous creation of a bank deposit and its corresponding debt.”

            You go on to say, “Depending on the amount of interest, and growth levels in the economy, it is mathematically possible to cover the interest payments since the same money can be earned and re-earned.” Are you saying here that it is possible to cover the interest & the principle – or just the interest part of loans? Also would you be able to elaborate on the idea of money being earned & re-earned?

            I think you are trying to say that under the present system, given certain conditions (ie adequate growth & low enough interest rates), it should be possible to decrease the general levels of debt. In other words growth should be able to overcome debt (or at least reduce it). This is something I’m trying resolve.

            Part of me thinks that nearly all money is debt & so can never be paid off. Debt money paying off debt money will never end. The debt will just get bigger. The other part of me thinks that it must be possible somehow to make a profit somewhere, to get ahead, to grow – to do something that overcomes the interest charged on loans. It “seems right” that growth should somehow overcome debt – but I don’t yet “know” this to be possible.

            There is of course another issue of whether perpetual growth is feasible within a finite world – but I’m still trying to resolve as to whether growth can overcome debt in the first place – especially in a debt based money supply.

          • DozyHole

            Just for simplicity, I create 100$ and lend it to you with the understanding that you repay 150$. You must pay 15$ a month for 10 months, 10$ principle(which I destroy upon payment) and 5$ interest. You might see that as long as I earn that interest payment back off you in some way each month then I will have enough money to pay the full amount, perhaps I clean your windows for 5$ a month.

            Looking at it this way proves that it can be mathematically possible even if it seems impossible at first. The key is that you must do some work directly for the lender, or indirectly in a complex economy.

            It should not be lost on anyone that this means we need to work for whoever supplies the money:)

            Steve Keen has also created more complex models which confirm that the interest can be repaid.

            That all said, all your concerns are correct in my opinion, just being mathematically possible does not mean that this system works, far from it, the constant expansion and contraction of the money supply in a complex economy can be pretty destructive.

          • DozyHole

            Can’t edit the post, I mixed up ‘you’ and ‘I’ in my example a couple of times, oops:)

          • Peter

            Thank you for your reply & the example you have given. I am thinking it through now. I understand that ‘I’ & ‘you’ got mixed up – but can see what you are driving at. For some reason – for all its simplicity – I’m still having to think about it – but bear with me & I will give a further response. Examples & models like this are good because it helps pin-point things down.

          • Peter

            You create 100$ in my account on the understanding that I pay you 150$ over 10 months. I pay you 15$ a month. You destroy 10$ (the principle) & keep 5$ interest as profit.

            If I were a cleaner, say, then I may clean your windows for 10$ a month (or someone else’s for that matter – but I just wanted the model to be as simple as possible). But if I did only that, then I would be 5$ a month short. So I would have to put in extra effort – say clean your doors & patio as well for the extra 5$.

            If I were prepared to wait & save the money you give me (or at least part of it) & didn’t need the 100$ now & so didn’t need to “borrow” it from you, then I could clean your windows for 10$ a month. Because I need the money “now”, I have to put in extra effort (more work) to cover the interest.

            Is my reasoning correct – does this follow your model? At the end of the day, in my version of your example, you don’t have the 50$ profit – because you paid it to me to clean your patio & doors – but then again that is your added bonus. You have had 150$ of work done for you because you had the authority to monetize my promise to pay 100$.

            My ability to pay you extra has been dependent on my growing my business & you deciding to spend your “profit” on my business. If you chose to just keep the 50$, then I would be stuck.

          • DozyHole

            “Is my reasoning correct – does this follow your model? At the end of the day, in my version of your example, you don’t have the 50$ profit – because you paid it to me to clean your patio & doors – but then again that is your added bonus. You have had 150$ of work done for you because you had the authority to monetize my promise to pay 100$.”

            In both versions, I don’t have 50$ profit but I have had 50$ worth of goods and services instead which can be considered profit.

            You touch on some good points about reality getting in the way.

            What if I don’t spend my profits and no-one else expands the money supply by going into debt?

            Is paying interest on the money supply a drag on all business?

            These are some of the reasons why I think our current monetary system is pretty ludicrous.

          • Peter

            Thank you for your reply. Sorry for not responding sooner – I’ve been away from the keyboard & also trying modify your model to show something that is wrong with the current system. I still haven’t quite got it – but it is related to there being not enough money.

            In the bank / window cleaning system – it works if you the bank pay me enough to clean your windows as well as accepting me as the door & patio cleaner. If you don’t – then I’ll have to take out another loan to tide me over. That’s what I’m wondering about the present system – no I still haven’t quite got it.

            Although – there still be something there: If you don’t allow me to clean your patio & doors – then I will be 5$ a month short & I will need to take out another loan to start covering the first and so on. If you the bank decides to save it’s profit – I will go further into debt.

            I will try & think of altering the model slightly to perhaps give a slightly better mirror to what we have now.

            “Is paying interest on the money supply a drag on all business?” – exactly. That’s what I am try to figure out. At the moment it looks as if businesses can function & overcome interest charges provided they have the opportunity to grow – or are paid adequately enough.

            It doesn’t quite hit the nail on the head – but I think I’ve made some progress. Thank you.

            Things to think about.

          • Simon

            I think a debt based money supply requires a constantly growing economy, and new debtors to be found, so existing debts and interest can be paid off. This is not possible in a finite world, globalisation, an ageing society, and more expensive energy supplies.

          • Peter

            I think you are right. Perpetual growth won’t fit in a finite world. I am now trying to figure out a model that will show what happens when debt based money is introduced into a debt free economy. Just to show the destructive effects of it – and also to see how those effects pan out over time.

          • Peter

            I think you are right. Perpetual growth won’t fit in a finite world. I am now trying to figure out a model that will show what happens when debt based money is introduced into a debt free economy. Just to show the destructive effects of it – and also to see how those effects pan out over time.

          • Peter

            DozyHole – I was interested in your earlier reply to Leo. My understanding of the present system is that the money supply is increased whenever a new “loan” or mortgage is authorized. As you said “It is not the interest that inflates the money supply, it is the principle. The simultaneous creation of a bank deposit and its corresponding debt.”

            You go on to say, “Depending on the amount of interest, and growth levels in the economy, it is mathematically possible to cover the interest payments since the same money can be earned and re-earned.” Are you saying here that it is possible to cover the interest & the principle – or just the interest part of loans? Also would you be able to elaborate on the idea of money being earned & re-earned?

            I think you are trying to say that under the present system, given certain conditions (ie adequate growth & low enough interest rates), it should be possible to decrease the general levels of debt. In other words growth should be able to overcome debt (or at least reduce it). This is something I’m trying resolve.

            Part of me thinks that nearly all money is debt & so can never be paid off. Debt money paying off debt money will never end. The debt will just get bigger. The other part of me thinks that it must be possible somehow to make a profit somewhere, to get ahead, to grow – to do something that overcomes the interest charged on loans. It “seems right” that growth should somehow overcome debt – but I don’t yet “know” this to be possible.

            There is of course another issue of whether perpetual growth is feasible within a finite world – but I’m still trying to resolve as to whether growth can overcome debt in the first place – especially in a debt based money supply.

          • DozyHole

            Just for simplicity, I create 100$ and lend it to you with the understanding that you repay 150$. You must pay 15$ a month for 10 months, 10$ principle(which I destroy upon payment) and 5$ interest. You might see that as long as I earn that interest payment back off you in some way each month then I will have enough money to pay the full amount, perhaps I clean your windows for 5$ a month.

            Looking at it this way proves that it can be mathematically possible even if it seems impossible at first. The key is that you must do some work directly for the lender, or indirectly in a complex economy.

            It should not be lost on anyone that this means we need to work for whoever supplies the money:)

            Steve Keen has also created more complex models which confirm that the interest can be repaid.

            That all said, all your concerns are correct in my opinion, just being mathematically possible does not mean that this system works, far from it, the constant expansion and contraction of the money supply in a complex economy can be pretty destructive.

          • Leo

            The economy operates and sustains itself on money. New money needs to be borrowed for whatever reasons. It cannot be printed privately nor can it be purchased. But the bankers treat these monetary loans as commercial transactions – THEY ARE NOT! Money is used to faciltate trade. In itself, it is not commercial. Just a tool.

            And you are saying that it’s the economy’s (collectively) fault for the inflation, when the system is designed by the bankers. The economy is just playing by their rules. US, Europe, UK and Japan (Asia coming very soon) are dying due to debts that cannot be repaid – all due to the interest charges. Open your eyes. You are defending a fraudulent system by faulting the people/economy. Absurd.

            Interest compounds over time. Even if 0% loans were given to the economy today, it still sits on its previous debts. And there’s still less money to repay the debt. Mathematically, the debt is always and will alwasy be larger than the principal under the current monetary system.

            Yes, you see people paying off their debts. But on whose expense? In this economy, the rich gets richer and the poor gets poorer. It’s called capitalism.

            The key thing here is that with every loan, debt is being inflated by the interest charges. Therefore, debt will be greater than the total money supply (M1). And, although money is created (only the principal amount), it is also destroyed. They print money everyday but they also destroy money everyday.

            BUT, they only print the principal amount and never print the interest amount. This is the crux of the issue. It’s a fraud. This is how the economy is impoverished and enslaved. This is how we get our homes and lands repossessed.

            The IMF monetary system does not work, period. Open your eyes and look at Greece and a slew of other nations. The debt is unpayable due to the interest charges.

            There’s still earth, wind, water and fire everywhere but people are suffering because every element on earth is bound by this fiat monetary system. The politicians made it so (in collusion with the bankers)! Again, open your eyes.

            The bankers designed this system (in collusion with the politicians) so they ought to own up to their failure and fraud. So don’t even think about blaming the problem on the people/economy.

            And, FYI bankers do not create money. They have no power to create money. They can only print them, either on the presses or on the computer system. Your signature on the loan contract does.

  • Gmail

    you’ll have to sell northern Ireland on auction…

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