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PeacePlan
11-11-2010, 12:07 PM
The dollar now has a built in self destruct that no one can stop.

I will make this in simple terms and try to leave out all the banking mumbojumbo. By using an example of what has been done to our dollar. I will use a poker game to make that example.

__________________________________________________ _____________

OK your at the casino and I am the house and will issue you chips. There are four of you that want to play. I lend you 5 chips each and you agree to pay me back the 5 plus 1 chip interest for the loan. So the four of you now owe a total of 24 chips.

There is no way to pay back 24 chips as I only gave you 20.

You need to come back to me to get another loan or you default.

__________________________________________________ _____________


Do you see the problem and why we are screwed? I think this is vital for all to understand. We all need to understand money and how it is created.

specsaregood
11-11-2010, 12:12 PM
You been reading hypertiger?

Cowlesy
11-11-2010, 12:13 PM
If it makes you feel better, I just listened to the head of UBS Wealth Management say don't be surprised to see QE3 and QE4. :P

PeacePlan
11-11-2010, 12:17 PM
If it makes you feel better, I just listened to the head of UBS Wealth Management say don't be surprised to see QE3 and QE4. :P


Yes the house is going to need to issue more chips or the defaults will come.

Seems our founders new more and understood money creation better than we do?

Travlyr
11-11-2010, 12:18 PM
The dollar now has a built in self destruct that no one can stop.

I will make this in simple terms and try to leave out all the banking mumbojumbo. By using an example of what has been done to our dollar. I will use a poker game to make that example.

__________________________________________________ _____________

OK your at the casino and I am the house and will issue you chips. There are four of you that want to play. I lend you 5 chips each and you agree to pay me back the 5 plus 1 chip interest for the loan. So the four of you now owe a total of 24 chips.

There is no way to pay back 24 chips as I only gave you 20.

You need to come back to me to get another loan or you default.

__________________________________________________ _____________


Do you see the problem and why we are screwed? I think this is vital for all to understand. We all need to understand money and how it is created.
Not a game I want to play.

PeacePlan
11-11-2010, 12:21 PM
I see we have someone who thinks the dollar will be ok. I would like to know how that can happen? I am no expert on this I just see no way out, and if someone does please share it. If I am wrong good, as I don't relish the collapse that I see as inevitable.

Travlyr
11-11-2010, 12:26 PM
This brings up an important point. By opting out and not playing your game, I will not be affected as much as the players. :D

PeacePlan
11-11-2010, 12:26 PM
I have to go and run some errands I hope we get some discussion on this... catch you all later.

specsaregood
11-11-2010, 12:27 PM
I see we have someone who thinks the dollar will be ok. I would like to know how that can happen? I am no expert on this I just see no way out, and if someone does please share it. If I am wrong good, as I don't relish the collapse that I see as inevitable.

It's not me as I am undecided.
But your simplistic example holds true for the entire concept of interest.

I've read some great debates on the subject. I've wondered if the idea of competing currencies negates the problem.

PeacePlan
11-11-2010, 12:28 PM
This brings up an important point. By opting out and not playing your game, I will not be affected as much as the players. :D

If you have no loans you are much better off - agreed

Austrian Econ Disciple
11-11-2010, 12:28 PM
That's not the way monetary systems and the world work at all. Assets are just as much money as money is, and productive capacity is just as much money as money is. You have a simplified erroneous view on money, banking, and interest. Might I recommend some Guido Hulsmann and Mises?

The reason the dollar is assured destruction is because of our debt levels, spending, and interest not only on short-term roll over debt, but on mortgages and pretty much everything else. If interest rates were raised to 8%, all the banks would default and so would the Government, not because of the reasons you are putting forth, but because the banks earn money through interest payments (most of these have been re-fied below 5%, and new fiduciary media are being lent out ridiculously low because of the Fed). Government interest payments would balloon to enormous levels if the Fed raise interest rates which when .Gov bonds and debt roll over would be increased. In either scenario (keeping interest rates low), or raising them both necessitate massive printing of the dollar (one to keep rates low, and one to just pay the interest on the debt (monetizing)).

Don't get suckered into the ridiculousness of the 'anti-usury' folks. They know zero about economics.

Austrian Econ Disciple
11-11-2010, 12:29 PM
It's not me as I am undecided.
But your simplistic example holds true for the entire concept of interest.

I've read some great debates on the subject. I've wondered if the idea of competing currencies negates the problem.


But your simplistic example holds true for the entire concept of interest.

No it doesn't.

Original_Intent
11-11-2010, 12:29 PM
The dollar now has a built in self destruct that no one can stop.

I will make this in simple terms and try to leave out all the banking mumbojumbo. By using an example of what has been done to our dollar. I will use a poker game to make that example.

__________________________________________________ _____________

OK your at the casino and I am the house and will issue you chips. There are four of you that want to play. I lend you 5 chips each and you agree to pay me back the 5 plus 1 chip interest for the loan. So the four of you now owe a total of 24 chips.

There is no way to pay back 24 chips as I only gave you 20.

You need to come back to me to get another loan or you default.

__________________________________________________ _____________


Do you see the problem and why we are screwed? I think this is vital for all to understand. We all need to understand money and how it is created.

Well, you are generally right, but there IS a way out in your simple example.
But you have to also remember the casino has Infinite Chips.

The way it COULD work is that the casino say, "Hey that's a nice money clip - I'll give you a chip for that. And then you pay back the loan plus interest. The point is, that the casino gains some real property for lending you something inherently worthless, and that they can create at will out of nothing.

That's the true end game - they don;t care about being paid back, they care about getting everyone so far in debt that they cannot be paid back and they "legally" take ownership of everything from the ground up.

Another way of looking at it: The bank gives you $100,000 to make a farm. You have to pay back $15,000 a year for ten years.

The only way to balance the equation is to create wealth - which you can do with your farm which is true capital. And some of that new wealth has to go back tot he bank as interest. Of course, again in our current system that is not what happens because the bank does not want to be paid back. They want the farm. (Why would they care about dollars when they have the printing press?)

That's why a commodity based standard for money is critical to liberty. It makes sure that value is traded for value. Current system you are forced to exchange your value for worthless paper.

edit: I see that Austrian Econ Disciple has already said essentially the same thing.

PeacePlan
11-11-2010, 12:30 PM
It's not me as I am undecided.
But your simplistic example holds true for the entire concept of interest.

I've read some great debates on the subject. I've wondered if the idea of competing currencies negates the problem.

Had to keep it simple so people could see. The old saying you can't see the forest though the trees.

If you figure out how that will stop the dollar from collapsing please post.

I gotta run L8r

Austrian Econ Disciple
11-11-2010, 12:32 PM
Had to keep it simple so people could see. The old saying you can't see the forest though the trees.

If you figure out how that will stop the dollar from collapsing please post.

I gotta run L8r

No, your simplistic view is not correct in the slightest. The only way to keep the dollar from collapsing is to immediately cut spending by 50% or more (by phasing out the War and Welfare machines), and ending the Federal Reserve (with a non-transfer of power to the Government -- e.g. eliminating legal tender, and prosecuting counterfeiting, not just giving the .Gov the Fed's power).

Jordan
11-11-2010, 12:35 PM
If you have no loans you are much better off - agreed

In an inflationary environment?

I don't have much to add to this discussion, I can't predict the future decisions and actions of just a few people resting on the Fed board. I'm still not convinced that following a massive run of QE2,3,4,5 that they won't then notch up bank reserves slowly, since its the only exit strategy that exists.

I am a bit concerned about the number of people who fear debt and inflation at the same time. Inflation is the cure to fixed interest debt. Bernanke at least gets this right.

After QE1-2 we're significantly more liquid, tons of cash floating around. The job now is to get this cash to flow into government coffers, pay off debt to foreigners, then flow back in through a positive trade balance and do it again. That's practically impossible, I know, but on the prospect of the off chance that it happens does have me at least somewhat hopeful. A productive economy with $1 in circulation can pay off a $100 debt, it is possible, it just requires some insane velocity.

But to get to the point, if you're fullscale expecting falling currency values and inflation, take on as much leverage as you can. Nothing wrong about paying off fixed rate debt in diluted dollars. I'm in no hurry to pay off credit card debt at 2% that I've had, and will have, for years to come. :D

Travlyr
11-11-2010, 12:35 PM
No, your simplistic view is not correct in the slightest. The only way to keep the dollar from collapsing is to immediately cut spending by 50% or more (by phasing out the War and Welfare machines), and ending the Federal Reserve (with a non-transfer of power to the Government -- e.g. eliminating legal tender, and prosecuting counterfeiting, not just giving the .Gov the Fed's power).
From where does the interest money come if spending is reduced by 50%?

specsaregood
11-11-2010, 12:36 PM
No it doesn't.

It does hold true for that specific simple example. which is what I was referring to.

The example holds true in a system where repayment can ONLY be made in the form that it was loaned out.

Original_Intent
11-11-2010, 12:37 PM
From where does the interest money come if spending is reduced by 50%?

From production.

Simple model: 5 guys - a banker and 4 "workers".

The banker lends eac worker $100, and they owe him $110 at the end of the year.

The 4 workers make stuff. Food, shelter, clothes, etc. The each produce 5 units of "goods". Each person also needs 1 unit of each of the other workers goods per year. and for our simple example each unit costs $20. It doesn't really matter though.

The bottom line is that at the end of the year, everyone ends up with $100 again, and they have one of each good, and two of the good that they produced.

They pay the banker back $100 each. The banker also needs goods, so he gives each of them $20 for a good. They then pay the banker the $10 interest they owe him.

Each of the 5 end up with the same "goods". Each of the workers ends up with $10 "profit". The banker ends up with $40 "interest". This is how debt can be paid off by production.

But again that is not how our current system is designed, being paid off is not the goal. Instead, the banker has allowed the interest to compound and kept shoveling as much money to the workers as they were willing to take. The dollars have no real value as they took no effort to produce. The banks can both buy up the means of production thru printed money, and also through the borrowers defaulting and losing the real property that the loans were taken out against.

Money as Debt was a great film that gets a lot of people thinking along the correct track, but it misses on some important points and totally fails in regards to the solution to the problem.

The only way out of our current dillemma (that I can see) is that we tell the banks that they contributed nothing of real value to our contract and we implement "9/10ths of the law" - it is either that or line up for our manacles and accept slavery.

PeacePlan
11-11-2010, 12:38 PM
Well, you are generally right, but there IS a way out in your simple example.
But you have to also remember the casino has Infinite Chips.

The way it COULD work is that the casino say, "Hey that's a nice money clip - I'll give you a chip for that. And then you pay back the loan plus interest. The point is, that the casino gains some real property for lending you something inherently worthless, and that they can create at will out of nothing.

That's the true end game - they don;t care about being paid back, they care about getting everyone so far in debt that they cannot be paid back and they "legally" take ownership of everything from the ground up.

Another way of looking at it: The bank gives you $100,000 to make a farm. You have to pay back $15,000 a year for ten years.

The only way to balance the equation is to create wealth - which you can do with your farm which is true capital. And some of that new wealth has to go back tot he bank as interest. Of course, again in our current system that is not what happens because the bank does not want to be paid back. They want the farm. (Why would they care about dollars when they have the printing press?)

That's why a commodity based standard for money is critical to liberty. It makes sure that value is traded for value. Current system you are forced to exchange your value for worthless paper.

edit: I see that Austrian Econ Disciple has already said essentially the same thing.

You are not creating real wealth with that farm you are selling your corn for more dollars (or chips) that others have got from the casino.

Austrian Econ Disciple
11-11-2010, 12:39 PM
From where does the interest money come if spending is reduced by 50%?

I don't understand what you are asking? Interest money comes from taxation or loans. That is the only way the Government gets money. It creates nothing. If the Government spent 50% less than it does now, that would alleviate quite a bit of issues. (By necessity a 50% decrease in spending would mean both a rollback of the Welfare and Warfare state and entitlements (both to persons and corporation/business))

The Government would still tax. The necessity for loans would dry up -- but, again, I don't see this occuring. The people of the US and the politicians won't ever cut either the Welfare or Warfare State. The way its going to end is through a collapse, and hopefully a few states with libertarian leanings, or either outright libertarian (We must get to NH!), will tell the Feds to fuck off and declare their independence.

Live_Free_Or_Die
11-11-2010, 12:41 PM
No, your simplistic view is not correct in the slightest. The only way to keep the dollar from collapsing is to immediately cut spending by 50% or more (by phasing out the War and Welfare machines), and ending the Federal Reserve (with a non-transfer of power to the Government -- e.g. eliminating legal tender, and prosecuting counterfeiting, not just giving the .Gov the Fed's power).

Which part of his simplistic view do you disagree with? There is a monopoly on legal tender. Competing currencies do eliminate the requirement to get chips from the casino in order to pay taxes when anything can be money.

TheDriver
11-11-2010, 12:44 PM
The dollar could be fixed by fixing it to gold and ending the out-of-control spending, watch video:

YouTube - Ending the Monetary Fiasco and Returning to Sound Money | Thorsten Polleit (http://www.youtube.com/watch?v=5w9mqaE10_A)

Austrian Econ Disciple
11-11-2010, 12:44 PM
Which part of his simplistic view do you disagree with? There is a monopoly on legal tender. Competing currencies do eliminate the requirement to get chips from the casino in order to pay taxes when anything can be money.

Because if you are unable to pay the House debt off, they won't simply say - oh too bad. They will take some of your assets which have value. Wealth is measured not solely in dollars, or whatever fiduciary media you have. Wealth is measured in assets, too. Assets are money, as much as money is money. I am surprised that people actually believe this usury bullhonky.

Travlyr
11-11-2010, 12:44 PM
This video series makes the claim that money is debt. In other words, more debt = more money. Reducing the debt (cut spending) reduces the amount of money available. It's pretty convincing.

YouTube - Money As Debt 1-4 (http://www.youtube.com/watch?v=mIIAvdJvCes)

Travlyr
11-11-2010, 12:49 PM
Because if you are unable to pay the House debt off, they won't simply say - oh too bad. They will take some of your assets which have value. Wealth is measured not solely in dollars, or whatever fiduciary media you have. Wealth is measured in assets, too. Assets are money, as much as money is money. I am surprised that people actually believe this usury bullhonky.
Sure. However, paying off debt created out of thin air with valuable assets is not a good wealth strategy.

Original_Intent
11-11-2010, 12:54 PM
You are not creating real wealth with that farm you are selling your corn for more dollars (or chips) that others have got from the casino.

see my above slightly more detailed explanation.

Austrian Econ Disciple
11-11-2010, 12:55 PM
YouTube - Money, Banking and the Federal Reserve (http://www.youtube.com/watch?v=iYZM58dulPE)

http://mises.org/Books/HumanActionScholars.pdf

Pages 535-584

http://mises.org/daily/4569

Austrian Econ Disciple
11-11-2010, 12:56 PM
Sure. However, paying off debt created out of thin air with valuable assets is not a good wealth strategy.

Of course it isn't. However, that wasn't the point to this hypothetical situation.

Original_Intent
11-11-2010, 12:56 PM
Because if you are unable to pay the House debt off, they won't simply say - oh too bad. They will take some of your assets which have value. Wealth is measured not solely in dollars, or whatever fiduciary media you have. Wealth is measured in assets, too. Assets are money, as much as money is money. I am surprised that people actually believe this usury bullhonky.

They believe it because they have been taught it theri whole lives.

specsaregood
11-11-2010, 01:11 PM
Because if you are unable to pay the House debt off, they won't simply say - oh too bad. They will take some of your assets which have value. Wealth is measured not solely in dollars, or whatever fiduciary media you have. Wealth is measured in assets, too. Assets are money, as much as money is money. I am surprised that people actually believe this usury bullhonky.

Careful now, you just agreed with the OP.
He said:


There is no way to pay back 24 chips as I only gave you 20.

You need to come back to me to get another loan or you default.

What you just described (them seizing assets in lieu of repayment) is defaulting.

Austrian Econ Disciple
11-11-2010, 01:16 PM
Careful now, you just agreed with the OP.
He said:

What you just described (them seizing assets in lieu of repayment) is defaulting.

True, I should have re-phrased it better. I like Murphy's explanation here:

My modest point in this article was to correct the widespread misconception that in a system of "debt-based money," further rounds of inflation are mathematically necessary to avoid default on previous loans. In general, this simply isn't true, because the bankers can spend their interest payments on real goods and services, thereby returning that money to the public, which can then use it again for further debt payments.

Which was my entire point. Assets are money just as money is money. The bankers will spend that money on assets, thereby re-entering the money into the chain and allowing you to pay off the interest and debt without ever having to inflate the supply of money. Find a new oil deposit, or a new logging company which re-plants vast forests, or finding new mineral deposits, or finding new more efficient ways of producing are all machinations of increasing the total wealth of society.

Live_Free_Or_Die
11-11-2010, 01:32 PM
Because if you are unable to pay the House debt off, they won't simply say - oh too bad. They will take some of your assets which have value. Wealth is measured not solely in dollars, or whatever fiduciary media you have. Wealth is measured in assets, too. Assets are money, as much as money is money. I am surprised that people actually believe this usury bullhonky.

Analogy:

Money = Energy
Federal Reserve = Monopoly producer of all energy
Government = Federal Reserve stockholder
We The People = Federal Reserve customer

In order to get any energy under an energy monopoly one must pledge their future to the Federal Reserve or find work that requires no energy investment. Work for an 18 year old homeless person with no family could be defined as begging. Obviously to wash any windshields on a street corner one must obtain a little energy or charity first to acquire the bucket, Windex, and wiper.

Could you provide a real world scenario in the United States excluding charity where one does not have to first obtain energy from the Federal Reserve?

hugolp
11-11-2010, 01:38 PM
Define collapse. If it is hyperinflation, not sure. If it is heavy inflation for sure.

specsaregood
11-11-2010, 01:39 PM
Which was my entire point. Assets are money just as money is money. The bankers will spend that money on assets, thereby re-entering the money into the chain and allowing you to pay off the interest and debt without ever having to inflate the supply of money. Find a new oil deposit, or a new logging company which re-plants vast forests, or finding new mineral deposits, or finding new more efficient ways of producing are all machinations of increasing the total wealth of society.

All of which is not possible in the simple example/scenario above. Which is why I said it held true. If dollars HAVE to be repaid with dollars, default is only possible end result.

Original_Intent
11-11-2010, 01:41 PM
True, I should have re-phrased it better. I like Murphy's explanation here:

My modest point in this article was to correct the widespread misconception that in a system of "debt-based money," further rounds of inflation are mathematically necessary to avoid default on previous loans. In general, this simply isn't true, because the bankers can spend their interest payments on real goods and services, thereby returning that money to the public, which can then use it again for further debt payments.

Which was my entire point. Assets are money just as money is money. The bankers will spend that money on assets, thereby re-entering the money into the chain and allowing you to pay off the interest and debt without ever having to inflate the supply of money. Find a new oil deposit, or a new logging company which re-plants vast forests, or finding new mineral deposits, or finding new more efficient ways of producing are all machinations of increasing the total wealth of society.

Which is exactly what I have been saying. The idea that debt can never be paid due to interest is a fallacy, and is where Money as Debt is completely wrong.

Austrian Econ Disciple
11-11-2010, 01:42 PM
All of which is not possible in the simple example/scenario above. Which is why I said it held true. If dollars HAVE to be repaid with dollars, default is only possible end result.


If dollars HAVE to be repaid with dollars, default is only possible end result

That is not true whatsoever. Hypotheticals must serve a purpose to illustrate real world phenomena. This does not at all, because it misses a whole host of economic phenomena. People would be wise to read some Mises, Bohm-Bawerk, and Hulsmann when it comes to interest, money, and banking.

specsaregood
11-11-2010, 01:52 PM
That is not true whatsoever. Hypotheticals must serve a purpose to illustrate real world phenomena.

This does not at all, because it misses a whole host of economic phenomena. People would be wise to read some Mises, Bohm-Bawerk, and Hulsmann when it comes to interest, money, and banking.

I don't disagree that it misses out on a lot of possibilities. It just means it is a poor hypothetical. But in his hypothetical situation (which excludes outside stimuli) his conclusion is correct.

Original_Intent
11-11-2010, 01:59 PM
I don't disagree that it misses out on a lot of possibilities. It just means it is a poor hypothetical. But in his hypothetical situation (which excludes outside stimuli) his conclusion is correct.

Yes, and the hypothetical is completely worthless because we don;t sit around playing cards all day.

The scenario laid out in the OP is not just a simplified model of how things are (which would be good) it is completely lacking enough substance to be good for anything.

It's a simplified version of "Money as Debt", which while good in that it gets people thinking, it's conclusions and much of what it says is wrong.

I mean they could each agree to work for the casino for an hour and be paid with 1 chip which they could then pay the interest with.

Austrian Econ Disciple
11-11-2010, 02:03 PM
I don't disagree that it misses out on a lot of possibilities. It just means it is a poor hypothetical. But in his hypothetical situation (which excludes outside stimuli) his conclusion is correct.

In this I would agree. However, I don't really see the point of such a hypothetical, because as I said, it serves no purpose :(

Travlyr
11-11-2010, 02:05 PM
The dollar could be fixed by fixing it to gold and ending the out-of-control spending, watch video:

YouTube - Ending the Monetary Fiasco and Returning to Sound Money | Thorsten Polleit (http://www.youtube.com/watch?v=5w9mqaE10_A)
Starting ~ 42:00 Thorsten Polleit describes how deflation will cause collapse of fiat money system.

PeacePlan
11-11-2010, 02:21 PM
True, I should have re-phrased it better. I like Murphy's explanation here:

My modest point in this article was to correct the widespread misconception that in a system of "debt-based money," further rounds of inflation are mathematically necessary to avoid default on previous loans. In general, this simply isn't true, because the bankers can spend their interest payments on real goods and services, thereby returning that money to the public, which can then use it again for further debt payments.

Which was my entire point. Assets are money just as money is money. The bankers will spend that money on assets, thereby re-entering the money into the chain and allowing you to pay off the interest and debt without ever having to inflate the supply of money. Find a new oil deposit, or a new logging company which re-plants vast forests, or finding new mineral deposits, or finding new more efficient ways of producing are all machinations of increasing the total wealth of society.

You have made good points and your answer makes sense to me.

This brings me to a point that pisses me off! Why don't we make our own money and get rid of the bankers. The interest we loan could be used for roads, defense schools etc. We need to get control of the money printing..

Thx all for the thoughtful responses.. I think this is something we all need more knowledge of.

Travlyr
11-11-2010, 02:44 PM
No, your simplistic view is not correct in the slightest. The only way to keep the dollar from collapsing is to immediately cut spending by 50% or more (by phasing out the War and Welfare machines), and ending the Federal Reserve (with a non-transfer of power to the Government -- e.g. eliminating legal tender, and prosecuting counterfeiting, not just giving the .Gov the Fed's power).
In an asset based system of sound money cutting spending would be wise.

Cutting spending in a debt based system of fiat money is different.
If cutting spending reduces the borrowing, then that would reduce the money supply which is deflation and cause a collapse.

Deborah K
11-11-2010, 02:46 PM
I'm starting to wonder, since the dollar is the world's base currency, if tptb are going to let it collapse, or are they going to morph it into some kind of global currency. If the dollar were to collapse, what happens to the debt? If the goal is to get us under global governance, then the way to do it is by keeping us as slaves to debt.

I'm beginning to think they've modified their plan and intend to bring the dollar to the brink and then pull it back by announcing a new global currency as our only saving grace.

Travlyr
11-11-2010, 02:54 PM
I'm starting to wonder, since the dollar is the world's base currency, if tptb are going to let it collapse, or are they going to morph it into some kind of global currency. If the dollar were to collapse, what happens to the debt? If the goal is to get us under global governance, then the way to do it is by keeping us as slaves to debt.

I'm beginning to think they've modified their plan and intend to bring the dollar to the brink and then pull it back by announcing a new global currency as our only saving grace.
I'm convinced that the globalists would like to announce a new global currency, but introducing more fiat money to replace a failed fiat currency may not go over as well as they hope. A few thousand staunch globalist elite vs. 6 billion people.
Keep working for us you slaves ... pretty tough sell.

specsaregood
11-11-2010, 03:02 PM
I'm convinced that the globalists would like to announce a new global currency, but introducing more fiat money to replace a failed fiat currency may not go over as well as they hope. A few thousand staunch globalist elite vs. 6 billion people.
Keep working for us you slaves ... pretty tough sell.

I think it would have gone over much easier prior to Dr. Pauls 2008 presidential run.

Anti Federalist
11-11-2010, 03:11 PM
I'm starting to wonder, since the dollar is the world's base currency, if tptb are going to let it collapse, or are they going to morph it into some kind of global currency. If the dollar were to collapse, what happens to the debt? If the goal is to get us under global governance, then the way to do it is by keeping us as slaves to debt.

I'm beginning to think they've modified their plan and intend to bring the dollar to the brink and then pull it back by announcing a new global currency as our only saving grace.

Not just the dollar but the entire engine of the American economy.

The forces that are gutting us are not acting alone and are not isolated.

Deborah K
11-11-2010, 03:11 PM
I'm convinced that the globalists would like to announce a new global currency, but introducing more fiat money to replace a failed fiat currency may not go over as well as they hope. A few thousand staunch globalist elite vs. 6 billion people.
Keep working for us you slaves ... pretty tough sell.

I agree that it is a tough sell these days. But they are clever. And patient. I think hyperinflation will happen and store shelves will empty and food riots will invite martial law. Once that situation has been manufactured in a few major cities, the sheeple (and there are still more of them than us) will be begging for the gov't to step in and solve the problem. Voila! Problem solved with a new global currency backed by PMs! (for a while anyway - until the next great war! - maybe with some country in asia or the middle east who doesn't want to play the global governance game?) Then we'll be back to a fiat currency only this time it will be global and will eventually be replaced with a chip implant - say - 35 years from now.

Has anyone read "Spychips" by Katherine Albrecht?

Anti Federalist
11-11-2010, 03:12 PM
I think it would have gone over much easier prior to Dr. Pauls 2008 presidential run.

No kidding...+1776

teacherone
11-11-2010, 03:13 PM
Starting ~ 42:00 Thorsten Polleit describes how deflation will cause collapse of fiat money system.

he's right--which is why bernanke is panicked and printing like crazy.

i'm fairly certain bernanke will beat this market force-- he can print till infinity.

Travlyr
11-11-2010, 03:14 PM
I think it would have gone over much easier prior to Dr. Pauls 2008 presidential run.
I am fully convinced you are right about this. Dr. Paul has been good for us. ;)

tmosley
11-11-2010, 04:05 PM
You might be able to escape via a structured default, but that would be H~ARD. The Fed would never impose the discipline to enforce it, and the politicians wouldn't have the guts to do it.

In theory, you could save the dollar by immediately making vast cuts in spending, dismantling the military empire, immediately changing the retirement age for SS to 80, and cutting departments left and right. If you could shrink the government to its pre-Fed size of 2% of GDP or less, you could use tax money to pay off the debt over time. With fewer (practically no) regulations, production would see a revival (despite the continuing high taxes). The tax base would thus increase within a couple of years (after a short but painful recession brought about by the shift away from reliance on big government). We could probably pay off the debt in this manner within five years. Afterwards, things would be found to be going so well, they would simply cut the taxes back to zero for most, retaining a small corporate tax or use tax of some sort to fund what is left of the government.

It could be done, but it would literally putting and holding a gun to the heads of every branch of government and forcing them to do it until it is done. As such, the likelihood is about as great as you opening the door to go outside and falling up into space.

Live_Free_Or_Die
11-11-2010, 06:40 PM
I hope you folks suggesting global currency is going to be a tough sell among a flock of people demanding rulers aren't serious.

If you are serious then please let me know when it happens....

What are you going to do about it? (expecting crickets)

cubical
11-11-2010, 07:18 PM
The dollar now has a built in self destruct that no one can stop.

I will make this in simple terms and try to leave out all the banking mumbojumbo. By using an example of what has been done to our dollar. I will use a poker game to make that example.

__________________________________________________ _____________

OK your at the casino and I am the house and will issue you chips. There are four of you that want to play. I lend you 5 chips each and you agree to pay me back the 5 plus 1 chip interest for the loan. So the four of you now owe a total of 24 chips.

There is no way to pay back 24 chips as I only gave you 20.

You need to come back to me to get another loan or you default.

__________________________________________________ _____________


Do you see the problem and why we are screwed? I think this is vital for all to understand. We all need to understand money and how it is created.

Except when the fed lent out money with interest attached originally there was already money floating around in the system. There is also assets that can be sold to generate money. So you example would make sense if there was no preexisting value in the system, but there was.

LibForestPaul
11-11-2010, 07:23 PM
Which is exactly what I have been saying. The idea that debt can never be paid due to interest is a fallacy, and is where Money as Debt is completely wrong.

Do you have some links or videos?

I simply do not see if I have all the medium of exchange, that you could pay me back all + interest.

i.e. I have 10 NAU units, I loan you all ten NAU units and demand repayment of 11 NAU units.Maybe Schroedinger can help you, but I simply do not see you paying me back anytime soon unless more NAU units are created, by me. Which I will lend to you, at interest.

Rancher
11-11-2010, 07:40 PM
This ^^^ eventually the interest money has to be created from the creator.

Deborah K
11-11-2010, 07:57 PM
I agree. Those who issue the money, do not issue the money needed to pay back interest, only the money used for the loan.

jclay2
11-11-2010, 07:59 PM
It could be done, but it would literally putting and holding a gun to the heads of every branch of government and forcing them to do it until it is done. As such, the likelihood is about as great as you opening the door to go outside and falling up into space.

Lol :D. Sadly, you are right on this one. Just look at the government "Deficit Reduction Panel". Even if we do take their suggested cuts, we won't have a balanced budget until 2037 (and thats using their completely bogus projections and assumptions). The only possible outcome is an inflationary default. With an aging population, the politicians will never embrace austerity. They will raise the "taxes" by inflating which will eventually lead to the downfall of western economies and the introduction of the super one world currency. :(

Austrian Econ Disciple
11-11-2010, 08:00 PM
No no no no no. How many times do I have to go over this. In the real world, those loaning out do so because they have lower time preferences and would rather have more money tomorrow than less today. Moreover, loans are not re-paid through one sole payment, but are subjected to increments, whereby you pay small sums until you owe nothing. In the real world, those receiving the loans must produce (e.g. create new wealth) in order to repay the loans and make a profit themselves. The person giving the loans receives these payments and then spends the money themselves on new goods and services created by those he just lent money to. You can pay off all debt with interest in any fixed fiduciary system.

People are looking at this the entirely wrong way. Assets are as much money as money is!

That is how money gains value. By keeping a relatively fixed money supply (as what happens with commodities such as Gold and Silver (not much is mined up)), new goods and services get created thereby making your 1 gram of gold or silver go further. It's called appreciation. Something the Free-Market is terrific at, if left to its devices (Capital maximization).

jclay2
11-11-2010, 08:29 PM
This ^^^ eventually the interest money has to be created from the creator.

Its not as simple as that. You have to remember that money is also going out to pay for funds (deposits, cd's, etc). Then you have to consider a lot of the ending cash will be given back to investors

Rancher
11-11-2010, 08:40 PM
Its not as simple as that. You have to remember that money is also going out to pay for funds (deposits, cd's, etc). Then you have to consider a lot of the ending cash will be given back to investors
If the creator does not create it, then where does this extra money come from?


Do you have some links or videos?

I simply do not see if I have all the medium of exchange, that you could pay me back all + interest.

i.e. I have 10 NAU units, I loan you all ten NAU units and demand repayment of 11 NAU units.Maybe Schroedinger can help you, but I simply do not see you paying me back anytime soon unless more NAU units are created, by me. Which I will lend to you, at interest.
Where do you get your 11th NAU?

Austrian Econ Disciple
11-11-2010, 08:47 PM
If the creator does not create it, then where does this extra money come from?


Where do you get your 11th NAU?

Does anyone read the thread at all?

My modest point in this article was to correct the widespread misconception that in a system of "debt-based money," further rounds of inflation are mathematically necessary to avoid default on previous loans. In general, this simply isn't true, because the bankers can spend their interest payments on real goods and services, thereby returning that money to the public, which can then use it again for further debt payments.

The 'new money' comes in the form of new wealth with which the loaners buy with the periodic sums you pay to them to repay your debt. Where do you think the loan goes to? It just poofs out of thin air? Using hypotheticals that have no real world application is completely idiotic, but whatever floats peoples boats. It doesn't help us understand the nature of economics, or action whatsoever.

Rancher
11-11-2010, 08:49 PM
Does anyone read the thread at all?

My modest point in this article was to correct the widespread misconception that in a system of "debt-based money," further rounds of inflation are mathematically necessary to avoid default on previous loans. In general, this simply isn't true, because the bankers can spend their interest payments on real goods and services, thereby returning that money to the public, which can then use it again for further debt payments.

The 'new money' comes in the form of new wealth with which the loaners buy with the periodic sums you pay to them to repay your debt. Where do you think the loan goes to? It just poofs out of thin air? Using hypotheticals that have no real world application is completely idiotic, but whatever floats peoples boats. It doesn't help us understand the nature of economics, or action whatsoever.

Answer the question. Where do you get the 11th NAU?

Austrian Econ Disciple
11-11-2010, 08:53 PM
Answer the question. Where do you get the 11th NAU?

Did you read my answer at all? The person who receives the loans uses the loan to produce more goods and services (That's the whole point to loans, for the most part). When you start to repay your debt (You don't pay it all at once), the person who loaned you the money will themselves have to purchase goods and services if they wish to survive. Thus, the same money is re-entered into the public, with which you can pay him back with. You do not need 11 NAU to pay it back. A monetary system with 10 NAU can pay back 50 NAU, or 20 NAU, or whatever NAU because of new assets (goods and services) being introduced into the economy. ASSETS ARE MONEY JUST AS MONEY IS MONEY.

This is the last time I will repeat myself.

Rancher
11-11-2010, 09:02 PM
No. The 11th NAU must be created. Otherwise you cannot pay the interest in NAU.

TheDriver
11-11-2010, 09:05 PM
Starting ~ 42:00 Thorsten Polleit describes how deflation will cause collapse of fiat money system.

And past that he gives you an outline of Rothbard's plan to divide the currency by gold reserves and set a gold standard. As long as the dollar is redeemable via a gold coin standard, it can be saved. :D

Travlyr
11-11-2010, 09:08 PM
The dollar could be fixed by fixing it to gold and ending the out-of-control spending, watch video:

YouTube - Ending the Monetary Fiasco and Returning to Sound Money | Thorsten Polleit (http://www.youtube.com/watch?v=5w9mqaE10_A)

AED, I think what you are missing here is that given legal tender laws, the only way that the new money comes into existence is that the Federal Reserve must authorize the new money. This is why the system crashes in a deflationary environment. ~ 42:00 Thorsten Polleit explains this concept.

Travlyr
11-11-2010, 09:10 PM
And past that he gives you an outline of Rothbard's plan to divide the currency by gold reserves and set a gold standard. As long as the dollar is redeemable via a gold coin standard, it can be saved. :D

Thanks TheDriver. I get it. But there is no political will to accomplish this. The best thing is to try and understand what is going on in the world and plan accordingly.

Austrian Econ Disciple
11-11-2010, 09:11 PM
No. The 11th NAU must be created. Otherwise you cannot pay the interest in NAU.

So, if you pay your monthly 1NAU to your loaner, and he then buys from you 1NAU worth of goods or services, and this continues (or not), it is impossible to pay off? Ha.

You have no idea what you are talking about, and won't even entertain the possibility you are wrong (which you are).

Rancher
11-11-2010, 09:15 PM
So, if you pay your monthly 1NAU to your loaner, and he then buys from you 1NAU worth of goods or services, and this continues (or not), it is impossible to pay off? Ha.

You have no idea what you are talking about, and won't even entertain the possibility you are wrong (which you are).
I'm wrong? There is only 10 NAU's in existence. You need 11 to pay the interest. Answer the question. Where does the 11th NAU come from? Are you going to counterfeit it? Or are you going to go back to the creator and borrow it?

Original_Intent
11-11-2010, 09:18 PM
I'm wrong? There is only 10 NAU's in existence. You need 11 to pay the interest. Answer the question. Where does the 11th NAU come from? Are you going to counterfeit it? Or are you going to go back to the creator and borrow it?

no you ninny like he has said ten times - I will sell something that I produced with the 10 NAU loan to the lender for the 11th NAU (which coincidentally was the first NAU that I repaid him.

I can find you a half dozen posts in this thread where it has been spelled out, I swear some people don't read, or they filter out anything that might force them to think.

specsaregood
11-11-2010, 09:19 PM
I'm wrong? There is only 10 NAU's in existence. You need 11 to pay the interest. Answer the question. Where does the 11th NAU come from? Are you going to counterfeit it? Or are you going to go back to the creator and borrow it?

The flaw is that you are assuming that all 11 have to be paid back at a single moment. Most loans don't work that way, you make payments...

Rancher
11-11-2010, 09:22 PM
The flaw is that you are assuming that all 11 have to be paid back at a single moment. Most loans don't work that way, you make payments...
I care nothing about most loans. I loaned you ten, you said that you were going to pay me my 10 +1 in interest. I control the printing of money. I want 11 as agreed. Pay me 11. Where do you get it? Answer the question. Where do you get it?

Original_Intent
11-11-2010, 09:25 PM
I care nothing about most loans. I loaned you ten, you said that you were going to pay me my 10 +1 in interest. I control the printing of money. I want 11 as agreed. Pay me 11. Where do you get it? Answer the question. Where do you get it?

The real world doesn't work that way - you're just being a retard to "win" the argument.

specsaregood
11-11-2010, 09:25 PM
I care nothing about most loans. I loaned you ten, you said that you were going to pay me my 10 +1 in interest. I control the printing of money. I want 11 as agreed. Pay me 11. Where do you get it? Answer the question. Where do you get it?

As has been pointed out earlier in the thread, in such a simplistic scenario with no outside stimuli the conclusion of default is correct. But it doesn't factor in reality.

Rancher
11-11-2010, 09:27 PM
no you ninny like he has said ten times - I will sell something that I produced with the 10 NAU loan to the lender for the 11th NAU (which coincidentally was the first NAU that I repaid him.

I can find you a half dozen posts in this thread where it has been spelled out, I swear some people don't read, or they filter out anything that might force them to think.
Ninny? Simply answer the question. I control the printing of money. I created 10 and loaned them to you. You promised to pay me back my 10 +1. I did not create the 11th one. Where do you get it? Remember, I am the only one who can create money.

Rancher
11-11-2010, 09:28 PM
NOBODY can answer the question! And I'm the idiot?

The fact is that it is impossible without creating additional money. The money supply must continually expand or it collapses.

live liberty
11-11-2010, 09:37 PM
He's right. That's what the guy says in the video.

PeacePlan
11-11-2010, 09:38 PM
Many people do not understand or get this stuff. I am glad I started this thread as it has people thinking about it and if a collapse comes it will be good to have some knowledge. I have to concede that it is not as simple as my example. That said I do believe that the example does have some truth in it in its basic form.

I would also like to point out no fiat system has ever worked for long. I have researched this some and as far as I can tell the tally stick from England seems to have lasted longest about 700 years if memory serves? Gold and Silver seem to be a natural money that has held some value for 5 or 6 thousand years. All the rest seem to go belly up and become worthless.

There is no reason for me to believe the dollars fate will be anything different than in the past. It also seems to me that people back in the time of the founders understood money better than most people do today. Makes me wonder why that is?

Thx everyone for your thoughts and input on this I have for sure learned a bit more.

Travlyr
11-11-2010, 09:50 PM
Hell, I've studied this shit for years and I still don't get it. Back in the 80's I looked at a $50 and it occurred to me that it cost the exact same amount to print a $50 as a $1. That pissed me off. I worked 3 hours to make a $50 in those days.

I started studying money. There was not much information in those days, but I learned that the people who printed the money was making a ton while I worked 11 to 12 hours a day and made a living.

I went to college to get more skills. But I was an outdoor guy ... grew up on a farm ... and did not want to spend my life in an office cell. I worked as a carpenter, but it was feast or famine. I drove a truck across country and it was fun, so to speak, but lonely.

And here I am still trying to learn how it works. I would have taken Wealth 101 or Money 101 if the school would have offered it. It's complicated.

Austrian Econ Disciple
11-11-2010, 09:51 PM
Many people do not understand or get this stuff. I am glad I started this thread as it has people thinking about it and if a collapse comes it will be good to have some knowledge. I have to concede that it is not as simple as my example. That said I do believe that the example does have some truth in it in its basic form.

I would also like to point out no fiat system has ever worked for long. I have researched this some and as far as I can tell the tally stick from England seems to have lasted longest about 700 years if memory serves? Gold and Silver seem to be a natural money that has held some value for 5 or 6 thousands. All the rest seem to go belly up and become worthless.

There is no reason for me to believe the dollars fate will be anything different than in the past. It also seems to me that people back in the time of the founders understood money better than most people do today. Makes me wonder why that is?
Thx everyone for your thoughts and input on this I have for sure learned a bit more.

Because they just went through hyper-inflation with the Continental. In any event, fiat systems do not work because whoever controls the press will enivitably print the money into oblivion (and most fiat systems have legal tender laws...), because it will be easy for politicians to promise the sun and the universe to get elected.

Like I said, your example has no real world application. It is entirely useless to any intellectual economic discussion either to gleen any truth, or to attempt to try and explain complex phenomena.

I will try and dumb this down as easily as I can...

In the real world bankers need food, shelter, and have wants and demands just like any other person. The interest (profit), they make from the loan will go back into the economy. You, the person receiving the loan uses the loan to increase your business productivity, find new resources, expand into new markets, etc. You increase your total net asset and worth (wealth). Since no one would take out a loan that had to be repaid all at once (defeats the entire purpose of the loan), it is not hard to picture a payment plan that was say monthly, bi-monthly, or annually. There are only 5 NAU in existence and you take out the loan for 5, planning on paying back 1 NAU every 2 months with a net interest of 2 NAU @ the end of the payment plan. After the first month, you pay him 1 NAU (You used 3 NAU to expand the business, find new resources, etc.), which he then proceeds to buy food, luxuries, etc. which get back to you, as you sell your goods and services. This continues until your loan is payed off. With new goods and services entering the market, you do not need an increase in the money supply to pay off interest. The new goods and services are your interest payments as you expand your business. This is the whole purpose of CAPITAL & Interest. Seriously, if you just open up Irwin and Peters comic book you will learn these basic economic principles in the first few pages with pictures even! :D

Austrian Econ Disciple
11-11-2010, 09:54 PM
Hell, I've studied this shit for years and I still don't get it. Back in the 80's I looked at a $50 and it occurred to me that it cost the exact same amount to print a $50 as a $1. That pissed me off. I worked 3 hours to make a $50 in those days.

I started studying money. There was not much information in those days, but I learned that the people who printed the money was making a ton while I worked 11 to 12 hours a day and made a living.

I went to college to get more skills. But I was an outdoor guy ... grew up on a farm ... and did not want to spend my life in an office cell. I worked as a carpenter, but it was feast or famine. I drove a truck across country and it was fun, so to speak, but lonely.

And here I am still trying to learn how it works. I would have taken Wealth 101 or Money 101 if the school would have offered it. It's complicated.

Just read Human Action pages 535-584. It deals with Capital and Interest. If after you read it you have more questions I will be happy to answer any questions you may have.

Travlyr
11-11-2010, 10:02 PM
Just read Human Action pages 535-584. It deals with Capital and Interest. If after you read it you have more questions I will be happy to answer any questions you may have.

Thanks. I find Ludwig von Mises writing over my head, but I'll give it a read to see if I understand it. Thanks again.

PeacePlan
11-11-2010, 10:09 PM
Because they just went through hyper-inflation with the Continental. In any event, fiat systems do not work because whoever controls the press will enivitably print the money into oblivion (and most fiat systems have legal tender laws...), because it will be easy for politicians to promise the sun and the universe to get elected.

Like I said, your example has no real world application. It is entirely useless to any intellectual economic discussion either to gleen any truth, or to attempt to try and explain complex phenomena.

I will try and dumb this down as easily as I can...

In the real world bankers need food, shelter, and have wants and demands just like any other person. The interest (profit), they make from the loan will go back into the economy. You, the person receiving the loan uses the loan to increase your business productivity, find new resources, expand into new markets, etc. You increase your total net asset and worth (wealth). Since no one would take out a loan that had to be repaid all at once (defeats the entire purpose of the loan), it is not hard to picture a payment plan that was say monthly, bi-monthly, or annually. There are only 5 NAU in existence and you take out the loan for 5, planning on paying back 1 NAU every 2 months with a net interest of 2 NAU @ the end of the payment plan. After the first month, you pay him 1 NAU (You used 3 NAU to expand the business, find new resources, etc.), which he then proceeds to buy food, luxuries, etc. which get back to you, as you sell your goods and services. This continues until your loan is payed off. With new goods and services entering the market, you do not need an increase in the money supply to pay off interest. The new goods and services are your interest payments as you expand your business. This is the whole purpose of CAPITAL & Interest. Seriously, if you just open up Irwin and Peters comic book you will learn these basic economic principles in the first few pages with pictures even! :D

You make it sound like this system can work. History shows me it doesn't work what am I missing? Fiat always fails and so will the dollar IMO Please show me a fiat system that does not fail and if they fail why do they always fail.

I do understand and get what you are saying but your explanation is in someways as simplistic as my example unless you can show that it works.. You sound good but wheres the beef.

I do want to understand this better............Thx

Austrian Econ Disciple
11-11-2010, 10:14 PM
You make it sound like this system can work. History shows me it doesn't work what am I missing? Fiat always fails and so will the dollar IMO Please show me a fiat system that does not fail and if they fail why do they always fail.

I do understand and get what you are saying but your explanation is in someways as simplistic as my example unless you can show that it works.. You sound good but wheres the beef.

I do want to understand this better............Thx

I am not trying to show that a fiat system can work, I am elucidating how a fixed monetary system (such as is commodity currencies which are pretty flat in increases of money stock (and can actually slowly deflate due to low mining output and higher than usual loss or use through industrial purposes)), does not need to 'inflate' in order to pay interests on loans. I think I quite clearly said that fiat systems cannot work. Did you read what I wrote? It's actually in the first paragraph.

PeacePlan
11-11-2010, 10:23 PM
So it is the human flaw that makes it fail. I did get your point on the first post on how the interest can be paid without giving out a new loan.

Damn politicians............. I am going to look for a film I saw on how fiat could work that I saw a while back. be back in a while and thx for all the input and your good insight.

Austrian Econ Disciple
11-11-2010, 10:27 PM
So it is the human flaw that makes it fail. I did get your point on the first post on how the interest can be paid without giving out a new loan.

Damn politicians............. I am going to look for a film I saw on how fiat could work that I saw a while back. be back in a while and thx for all the input and your good insight.

Anytime. I try not to get flustered when I have to repeat the same thing so many times, and if I become abrasive, just let me know and I will try and stay as calm as can be :D

Rancher
11-11-2010, 10:50 PM
I plan to read "Human Action", but I am already questioning the value of a man who did not endure "fiat money" as a basis for debt money. Thorsten Polleit seems to have a better handle on the facts than Mises.

cubical
11-11-2010, 10:57 PM
NOBODY can answer the question! And I'm the idiot?

The fact is that it is impossible without creating additional money. The money supply must continually expand or it collapses.

as I said before there was money AND value in the economy BEFORE money+interest was printed. plus you are assuming the interest that is paid back over time is never put back into the economy.

PeacePlan
11-11-2010, 11:15 PM
Anytime. I try not to get flustered when I have to repeat the same thing so many times, and if I become abrasive, just let me know and I will try and stay as calm as can be :D

Don't worry I don't take any of this personally and actually enjoy the critique as it helps me sort out the flaws in my thinking.. Good job so far I think you are explaining things pretty well from your view.

I found the film I was looking for and will post it here. At about 120 to 121 he explains how a fiat system could work... I don't see this working as I do not see how it would reduce Government. I do agree that the fractional reserve banking should go... Maybe competing currency as Ron Paul suggests is the best answer. I don't see how that will deal with the huge debt and liabilities the nation has incurred?

Here is the movie about 120 into it take a look..

The Money Masters - Part 1 of 2 (http://video.google.com/videoplay?docid=6076118677860424204#docid=-7336845760512239683)

TheDriver
11-11-2010, 11:19 PM
Thanks TheDriver. I get it. But there is no political will to accomplish this. The best thing is to try and understand what is going on in the world and plan accordingly.

Totally agree ^

Travlyr
11-12-2010, 08:04 AM
I hope you folks suggesting global currency is going to be a tough sell among a flock of people demanding rulers aren't serious.

If you are serious then please let me know when it happens....

What are you going to do about it? (expecting crickets)

Chirp, chirp ... you talking to me?

I'm convinced that the globalists would like to announce a new global currency, but introducing more fiat money to replace a failed fiat currency may not go over as well as they hope. A few thousand staunch globalist elite vs. 6 billion people.
Keep working for us you slaves ... pretty tough sell.

LibForestPaul
11-12-2010, 08:11 PM
I am not trying to show that a fiat system can work, I am elucidating how a fixed monetary system (such as is commodity currencies which are pretty flat in increases of money stock (and can actually slowly deflate due to low mining output and higher than usual loss or use through industrial purposes)), does not need to 'inflate' in order to pay interests on loans. I think I quite clearly said that fiat systems cannot work. Did you read what I wrote? It's actually in the first paragraph.

So in your system, as opposed to current fiat, the money supply itself does not necessarily expand?
There is never 11 NAU units? Just an increase (unless default) and exchange in peoples', banks', corporations', societies', etc) ASSET column (NAU vs fish vs gold vs car). Assets may includes any of the following: capitol, processes, machinery, even knowledge (certain services are ASSETS while others are just consumption).

P.S. Pictures work better, double entry with asset and liabilities make this somewhat clearer. I tried to post example, still a bit foggy though. I'll check out more of your links.

Thanks! Though not entirely comfortable.;)

Austrian Econ Disciple
11-12-2010, 08:20 PM
So in your system, as opposed to current fiat, the money supply itself does not necessarily expand?
There is never 11 NAU units? Just an increase (unless default) and exchange in peoples', banks', corporations', societies', etc) ASSET column (NAU vs fish vs gold vs car). Assets may includes any of the following: capitol, processes, machinery, even knowledge (certain services are ASSETS while others are just consumption).

P.S. Pictures work better, double entry with asset and liabilities make this somewhat clearer. I tried to post example, still a bit foggy though. I'll check out more of your links.

Thanks! Though not entirely comfortable.;)

It isn't my system. It is the market. Historically commodity currencies like Gold and Silver stay pretty stable in terms of money stock. I remember listening to one of Thomas Woods' lectures and from the period of 1100 to 1600 the money stock had something on the order of 0.04% annual inflation with a total inflation of about 1-2%. Gold and Silver does get lost over time and, it still had industrial and luxurious purposes in those ages also.

Bankers under a commodity system (this can be in conjunction with free-banking & fiat systems (though I don't see many actually using this -- but, the greed will be curbed by the fear through competition)), have the same wants and needs as any other individual. Human wants are infinite. The money returned in interest will be spent by the bankers (they do get paid you know), either through paying employees, buying food, luxuries, etc. The reason the money is continuously re-circulated throughout the economy is because new goods and services are being produced, and without taxation (optimally), capital can accrue very rapidly. I wouldn't be surprised to see Somalia in 50 years become the next Hong Kong if the world continues to crash and burn (won't be able to afford to meddle with Somalia). In any event, the point I am making is that money is not static, and that through the circulation of money through the economy via new goods and services one can easily pay off loans with interest even if the total money stock is less than what is currently loaned out with interest added.

I don't proclaim to own any of these ideas, or systems. It is just a praxeologically deduced fact. Anyone is capable of coming to these ideas on their own (as Irwin Schiff did), through logic and human action.

I will try a flow chart:

5NAU Principle + 2 NAU Interest (Banker or investor, or anyone who loans money for that matter) > Loanee (Terms of contract: monthly 1 NAU payment for 7 months -- finality pay 7NAU in 7 months to borrow 5 NAU now) > Loanee invests 3 NAU to expand and find new resources and or increase production > Loanee pays loaner 1 NAU (Loanee left with 1NAU) > Loaner takes 1 NAU and buys food, houses, cars, computers, luxuries, property, whatever it may be, pays employees, expands into new markets, etc. (You can see how capital quickly can build on each other) > This money finds itself back to the original Loanee because he is selling his goods and services to those who now have the 1NAU which the banker spent (Loanee 2 NAU owes 6 NAU) > ad infinitum.

Hopefully that is a bit clearer. Austrians are currently really one of the only Schools which actually places time in our economic science. Time is crucial. You can't have hypotheticals and not include time and other realistic human interaction and action, otherwise the hypothetical is absolutely worthless.