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Thread: The Mandrake Mechanism.

  1. #1

    The Mandrake Mechanism.

    Anyone read this article?

    The Mandrake Mechanism

    In it are the following paragraphs:


    It is difficult for Americans to come to grips with the fact that their total money-supply is backed by nothing but debt, and it is even more mind boggling to visualize that, if everyone paid back all that was borrowed, there would be no money left in existence.

    That's right, there would not be one penny in circulation -- all coins and all paper currency would be returned to bank vaults -- and there would be not one dollar in any one's checking account. In short, all money would disappear."

    I don't think this is true. If our monetary system had been bolted on top of a pure barter system, that would be true. This is because if there is zero money in an economy, loaning money into it at interest would be impossible. It would force some individuals to default on their loans. Which of course could make the system "work" in a way, and then that individual could work for someone who was able to pay off their loans, but nobody wants to live in a system that FORCES anyone to default on their loans.

    Fiat monetary systems have always been bolted on top of an economy that already had real money in circulation: gold, silver. etc. This can "work" because as long as the sum total of all bonds and fractional loans made are smaller than the amount of money already in circulation, nobody is forced to go bankrupt. All those debts can be serviced. Once they are, the interest payments received by banks and the government can be re-spent/invested in the economy, and thus the money supply has been inflated without logically forcing anyone to default on a loan.

    That said however, the inflation tax is obviously still a problem since the government is always the first one who gets to spend newly inflated money. I think that hard money advocates would have an easier time convincing people satisfied with the status quo if they adopted this more moderate stance. To suggest that paying off all debts would erase all money from existence is a rather extreme position to take...and I think anyone who does take that position hasn't considered the fact that all fiat money systems are created on top of a system in which money was already circulating.
    Last edited by Pianist4Freedom; 03-04-2008 at 10:21 AM.

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  3. #2
    To paraphrase Bubba Clinton, "It all depends on what the meaning of money is." And on who is doing the defining of the meaning. The free market place defines it one way, the government defines it another way. Kinda like "income".<IMHO>

    Griffen talks about the "mandrake mechanism" some in this speech.
    Last edited by Truth Warrior; 03-04-2008 at 10:30 AM.

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