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The Dynamo wrote:Well I have watched the video but I can only say that I believe that my own understanding of the relationship between money, debt and the creation of wealth is much simpler than the concept in the video.


I'd certainly be interested in heqaring your own understanding of it and how it differs ( and is simpler ) than what is explained in the video. :)

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smeggypants wrote:
The Dynamo wrote:Well I have watched the video but I can only say that I believe that my own understanding of the relationship between money, debt and the creation of wealth is much simpler than the concept in the video.


I'd certainly be interested in heqaring your own understanding of it and how it differs ( and is simpler ) than what is explained in the video. :)


Well I will certainly only be too happy to explain my simple understanding of the complexities of high finance, the creation of wealth and the part that debt pays.

I am hopeful that my simple explanation will be easy to understand and delivered in a shorter time scale than it took me to watch the 47 minute video, one can but only try :)

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I hate to spoil Smeggy's party but it ain't the Banks that create the money it's millions of ordinary folk from all over the world with a sound investment strategy.....just like me.....in a small way of course ;)

This example is only from the UK

The value of the private housing stock (£4.0 trillion) was 3.4 times the value of outstanding mortgage debt of £1.2 trillion at the end of 2007. Ten years ago, private sector housing assets were 3.0 times higher than mortgage debt. Housing assets have increased by more than mortgage debt levels in each year since 1995.

Household wealth has doubled over the past ten years. Net household wealth (including financial and property assets) is estimated at £6.7 trillion in 2007, up 106% from £3.3 trillion in 1997. Housing accounts for 41% of net household wealth, up from 27% a decade ago.

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The Dynamo wrote:I hate to spoil Smeggy's party but it ain't the Banks that create the money it's millions of ordinary folk from all over the world with a sound investment strategy.....just like me.....in a small way of course ;)

This example is only from the UK

The value of the private housing stock (£4.0 trillion) was 3.4 times the value of outstanding mortgage debt of £1.2 trillion at the end of 2007. Ten years ago, private sector housing assets were 3.0 times higher than mortgage debt. Housing assets have increased by more than mortgage debt levels in each year since 1995.

Household wealth has doubled over the past ten years. Net household wealth (including financial and property assets) is estimated at £6.7 trillion in 2007, up 106% from £3.3 trillion in 1997. Housing accounts for 41% of net household wealth, up from 27% a decade ago.


No you're not spoiling a party, in fact if anything you're adding to it :) Your example above is talking about the value of wealth/assets. which is something different from money creation.

In our economic systems money is created by debt. i.e fractional reserve banking. Banks create money by crediting borrowers with x amount allowed by the fractional reserve figures.1

Asset levels are only what people can/will apply for them. If the banks restrict the money supply as they did following the 1929 stock crash then those assets are worth fuck all. And for those with HUGE amounts of money the chance to buy up assets extremely cheap is of course desirable as they can make a huge profit on selling them when their value rises again.

The value of private housing stock being worth £4 Trillion is tad meaningless really. What would happen if EVERYONE put their house on the market at once? It wouldn't' be worth £4 trillion then. It would be worth bugger all. Certainly a helluva lot less than the outstanding £1.3 trillion that still has to be paid back.

Ordinary investors can of course do well but ultimately you are at the mercy of the banking system because they control the money supply and the creation of it. And if they want they can reduce the value of your assets to sod all, and still force you to pay back your loans/or bankruptcy.

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Oh dear!!!!!!

I can see that I am going to have an almighty struggle to try and convince Smeggy that the perspective is all wrong.

However I will not throw in the towel just yet, I may resort to the drip feed technique to get the message across.

As I have previously stated money is only a currency with which to transfer wealth, this wealth can be in various forms but it must be converted into financial terms in order to facilitate a transfer.

A good example is a country that is sitting on vast natural reserves, when these reserves are converted into money the said country will become exceedingly rich, the same can apply to an individual, if they can convert raw materials into tangible good then they will also become exceedingly rich.

Also if an individual is in possession of exceptional skills that can also be converted into money, it's all about how to get rich.

Debt is only a means to an end, it can be used to either help create wealth or as a means to enhance lifestyle, because it comes at a cost it may be advantageous to control it or even eliminate it all together.

It's reasonable to say that tangible goods and assets have actually replaced the gold standard as a basis for the value of money or currency and if this is complimented by having no debt then it's a healthy state to be in.

The control of the money supply is only necessary to help the folks who still use money for purchases, all the wealth is usually transferred electronically in seconds.

It would create a problem if all the rich folk descended on the banks and demanded their money in cash I would think.

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The Dynamo wrote:Oh dear!!!!!!

I can see that I am going to have an almighty struggle to try and convince Smeggy that the perspective is all wrong.

However I will not throw in the towel just yet, I may resort to the drip feed technique to get the message across.

As I have previously stated money is only a currency with which to transfer wealth, this wealth can be in various forms but it must be converted into financial terms in order to facilitate a transfer.

A good example is a country that is sitting on vast natural reserves, when these reserves are converted into money the said country will become exceedingly rich, the same can apply to an individual, if they can convert raw materials into tangible good then they will also become exceedingly rich.

Also if an individual is in possession of exceptional skills that can also be converted into money, it's all about how to get rich.

Debt is only a means to an end, it can be used to either help create wealth or as a means to enhance lifestyle, because it comes at a cost it may be advantageous to control it or even eliminate it all together.

It's reasonable to say that tangible goods and assets have actually replaced the gold standard as a basis for the value of money or currency and if this is complimented by having no debt then it's a healthy state to be in.


The control of the money supply is only necessary to help the folks who still use money for purchases, all the wealth is usually transferred electronically in seconds.

It would create a problem if all the rich folk descended on the banks and demanded their money in cash I would think.



I wouldn't argue with the bulk of your post. it's got little to do with any argument against the fractional reserve system though.

I would however like to like to comment on the statement in bold. Whether the money is physically stored or transferred as 'cash' or simply an account entry that can be transferred electronically is really neither here nor there. In fact are you sure you're not misinterpreting things with regard to that misunderstanding.

Anyway ..... the control of the money supply makes a huge difference to the state of the economy. The Bank of England controls the money supply largely by setting interest rates. Set the rates low and more money is created into the economy because debt is cheap and easy to come by. Setting the interest rates high and the opposite happens. the downside of too much money in the economy of course is inflation because the value of money depreciates faster. but on the other side too little inflation would indicate that not enough new money is being created to be able to pay of the interest on the money in circulation ( Circulation means both cash and accounted money btw, just to be clear :) )

You say "It would create a problem if all the rich folk descended on the banks and demanded their money in cash I would think."

Well yes it most certainly would. Not just the rich folk but all folk and not just cash. Fractional reserve banking means there is only the reserves to cope with 10% of that. IIRC our fractional reserve is 10:1 . Some countries use 20:1 or higher II believe.


But anyway the biggest problem with the economic system that's been put in place by the bankers so they can leech the countries wealth by earning interest on every pound in circulation is that we need to keep borrowing to pay off the interest that's added on. if we didn't then the money in circulation would dwindle to zero. Although we'd all starve well before that happened of course.

This kind of system requires an infinitely expanding economy to simply prevent it from collapsing and means a very few people , the bankers end up getting closer to having ALL the wealth in existence. The only reason the rest of us can have some wealth is because they lend it to us after creating it out of thin air. And by law they are are legally entitled to do so.

This is nothing to do with me having the wrong perspective. This is how the system works.

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Thanks for that Smeggy, it's worthy of a response but first I will have to create more time.....I shall be back..... :)

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smeggypants wrote:But anyway the biggest problem with the economic system that's been put in place by the bankers so they can leech the countries wealth by earning interest on every pound in circulation is that we need to keep borrowing to pay off the interest that's added on. if we didn't then the money in circulation would dwindle to zero. Although we'd all starve well before that happened of course.

This kind of system requires an infinitely expanding economy to simply prevent it from collapsing and means a very few people , the bankers end up getting closer to having ALL the wealth in existence. The only reason the rest of us can have some wealth is because they lend it to us after creating it out of thin air. And by law they are are legally entitled to do so.

This is nothing to do with me having the wrong perspective. This is how the system works.


That is not strictly true, all the bank does is lend the borrower the initial sum to purchase an asset, the borrower is then required to repay the initial sum with interest.

The bank dosen't lend us wealth, they only lend the money to help create the wealth.

If the asset actually appreciates in value then it is the borrower who actually benefits from the appreciation not the bank.

Alternatively if the asset depreciates then the borrower still has to repay the initial sum plus interest, if however that asset is ones humble abode it doesn't matter if it becomes worthless it will still be a home.

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The Dynamo wrote:
smeggypants wrote:But anyway the biggest problem with the economic system that's been put in place by the bankers so they can leech the countries wealth by earning interest on every pound in circulation is that we need to keep borrowing to pay off the interest that's added on. if we didn't then the money in circulation would dwindle to zero. Although we'd all starve well before that happened of course.

This kind of system requires an infinitely expanding economy to simply prevent it from collapsing and means a very few people , the bankers end up getting closer to having ALL the wealth in existence. The only reason the rest of us can have some wealth is because they lend it to us after creating it out of thin air. And by law they are are legally entitled to do so.

This is nothing to do with me having the wrong perspective. This is how the system works.


That is not strictly true, all the bank does is lend the borrower the initial sum to purchase an asset, the borrower is then required to repay the initial sum with interest.

The bank doesn't lend us wealth, they only lend the money to help create the wealth.


Sorry, I didn't phrase that very well. I didn't mean the bank lends us wealth ( it was late :oops: ). When we take out a loan the bank, through fractional reserve, creates money out of thin air and credits our account with it. we pay it back and that cancels that out, How the interest added on obvsiouly goes to the bank. So in a sense the bank get's money for nothing.

If the asset actually appreciates in value then it is the borrower who actually benefits from the appreciation not the bank.

Alternatively if the asset depreciates then the borrower still has to repay the initial sum plus interest, if however that asset is ones humble abode it doesn't matter if it becomes worthless it will still be a home.


Yes both the above is true. :)

But the way the banks can get all the wealth is inherent in the system they have created and how it gives them control. The banks can control the value of our assets by controlling the supply of money. They can do this because they are the one's who create the money. If the banks give us a reasonably free supply of money then the economy booms because people are borrowing and investing and there is economic buoyancy. if the banks reduce the money supply. then this slows down the economy and people start to lose jobs and assets become less valuable and so on. Of course the banks can't just let the money flow freely, as obviously this will cause hyperinflation.

The ruling eilte bankers cream up the wealth by creating boom and bust cycles by opening and closing the money valve. it's quite simple. they close off the money supply, which causes a percentage of businesses to go under and they buy them up at pennies on the pound. They then open up the money supply and sell them on at a huge profit. this is on top of raking in interest on every pound in circulation.

A proper economic system would allow a much more even distribution of wealth. The current system means 99% of the wealth is owned by 1% of the people. And that's probably a conservative estimate. Land, one of man's most valuable assets is certainly not evenly distributed. most people now live in urban areas and either don't own any land or own very little. And this is set to get worse over the next century.

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smeggypants wrote:Yes both the above is true. :)

But the way the banks can get all the wealth is inherent in the system they have created and how it gives them control. The banks can control the value of our assets by controlling the supply of money. They can do this because they are the one's who create the money. If the banks give us a reasonably free supply of money then the economy booms because people are borrowing and investing and there is economic buoyancy. if the banks reduce the money supply. then this slows down the economy and people start to lose jobs and assets become less valuable and so on. Of course the banks can't just let the money flow freely, as obviously this will cause hyperinflation.

The ruling eilte bankers cream up the wealth by creating boom and bust cycles by opening and closing the money valve. it's quite simple. they close off the money supply, which causes a percentage of businesses to go under and they buy them up at pennies on the pound. They then open up the money supply and sell them on at a huge profit. this is on top of raking in interest on every pound in circulation.

A proper economic system would allow a much more even distribution of wealth. The current system means 99% of the wealth is owned by 1% of the people. And that's probably a conservative estimate. Land, one of man's most valuable assets is certainly not evenly distributed. most people now live in urban areas and either don't own any land or own very little. And this is set to get worse over the next century.


Well if that is how the system works it does prompt a leading question, how is it that Northern Rock were not able to create more money :)

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The Dynamo wrote:
smeggypants wrote:Yes both the above is true. :)

But the way the banks can get all the wealth is inherent in the system they have created and how it gives them control. The banks can control the value of our assets by controlling the supply of money. They can do this because they are the one's who create the money. If the banks give us a reasonably free supply of money then the economy booms because people are borrowing and investing and there is economic buoyancy. if the banks reduce the money supply. then this slows down the economy and people start to lose jobs and assets become less valuable and so on. Of course the banks can't just let the money flow freely, as obviously this will cause hyperinflation.

The ruling eilte bankers cream up the wealth by creating boom and bust cycles by opening and closing the money valve. it's quite simple. they close off the money supply, which causes a percentage of businesses to go under and they buy them up at pennies on the pound. They then open up the money supply and sell them on at a huge profit. this is on top of raking in interest on every pound in circulation.

A proper economic system would allow a much more even distribution of wealth. The current system means 99% of the wealth is owned by 1% of the people. And that's probably a conservative estimate. Land, one of man's most valuable assets is certainly not evenly distributed. most people now live in urban areas and either don't own any land or own very little. And this is set to get worse over the next century.


Well if that is how the system works it does prompt a leading question, how is it that Northern Rock were not able to create more money :)


There was more money created for northern rock though wasn't there? To bail it out. In fact the central banks all over the world, The Fed, the EU central bank, the Japenese central bank created money to bail out all those banks in trouble over the Sub-Prime problems last year.

Our national debt is £1.3 TRILLION because of money created to lend to the government. The interest on that wipes out half of the country's income tax. or it would if we didn't have to pay it. This is the problem with an economic system based upon usury and fractional reserve banking. it drains the country of it's wealth and puts it in the hands of the bankers.

There are regulations of course. I mean if we all were able to print money as when we required it then there would be hyperinflation, ala Zimbabwe, and that's why this doesn't happen.

The video paints an accurate picture of how our economic systems ahve developed and currently work.

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smeggypants wrote:There was more money created for northern rock though wasn't there? To bail it out. In fact the central banks all over the world, The Fed, the EU central bank, the Japenese central bank created money to bail out all those banks in trouble over the Sub-Prime problems last year.

Our national debt is £1.3 TRILLION because of money created to lend to the government. The interest on that wipes out half of the country's income tax. or it would if we didn't have to pay it. This is the problem with an economic system based upon usury and fractional reserve banking. it drains the country of it's wealth and puts it in the hands of the bankers.

There are regulations of course. I mean if we all were able to print money as when we required it then there would be hyperinflation, ala Zimbabwe, and that's why this doesn't happen.

The video paints an accurate picture of how our economic systems ahve developed and currently work.


That's fine but I think there is a need to draw a distinction between a central bank and a one that is owned by the shareholders, they don't create money, they have to balance their books.

This is the national debt.

Net debt was £512.4 billion at the end of January, compared with £480.1 billion a year earlier. The Pre-Budget forecast for net debt at the end of March 2008 is £542.4 billion.

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The Dynamo wrote:
smeggypants wrote:There was more money created for northern rock though wasn't there? To bail it out. In fact the central banks all over the world, The Fed, the EU central bank, the Japenese central bank created money to bail out all those banks in trouble over the Sub-Prime problems last year.

Our national debt is £1.3 TRILLION because of money created to lend to the government. The interest on that wipes out half of the country's income tax. or it would if we didn't have to pay it. This is the problem with an economic system based upon usury and fractional reserve banking. it drains the country of it's wealth and puts it in the hands of the bankers.

There are regulations of course. I mean if we all were able to print money as when we required it then there would be hyperinflation, ala Zimbabwe, and that's why this doesn't happen.

The video paints an accurate picture of how our economic systems have developed and currently work.


That's fine but I think there is a need to draw a distinction between a central bank and a one that is owned by the shareholders, they don't create money, they have to balance their books.


No, private banks create money via the fractional reserve system. They've been doing it for hundreds of years. And don't forget the Bank of England was a Private Bank for most of it's life. It was only nationalised in 1946 . although really it might as well be a privatised bank in practise as the government bought the bank on bonds and is still paying for it IIRC.

http://en.wikipedia.org/wiki/Fractional_reserve_banking

http://en.wikipedia.org/wiki/Money_creation

You may find the above two articles helpful. Especially the money creation one. Section 2.4 An example of the creation of new money in the USA runs through how money is created through Fractional reserve banking


This is the national debt.

Net debt was £512.4 billion at the end of January, compared with £480.1 billion a year earlier. The Pre-Budget forecast for net debt at the end of March 2008 is £542.4 billion.


http://www.dailymail.co.uk/pages/live/a ... ge_id=1770

this was in 2006

"The report for the respected Centre for Policy Studies think tank says the official Treasury figure of £487 billion wrongly excludes the cost of public sector pensions liabilities, the hidden costs of Labour's flagship Private Finance Initiative contracts and debts incurred by Network Rail. When these are taken into account the total is £1,340 billion, which is 103.5 per cent of GDP. "

Gordon Brown is infamous for lying about government figures. His triple accounting scandal was proof of that one.

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Thanks for that Smeggy, I will of course endeavor to follow all that up at the earliest opportunity.

In the meantime I am under extreme pressure with my wife breathing down my neck to complete a project I started.

Yesterday I came across this web page and it is so near the bone I couldn't decide if you were the author or if it was your bible :)

http://www.bilderberg.org/monref.htm

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The Dynamo wrote:Thanks for that Smeggy, I will of course endeavor to follow all that up at the earliest opportunity.

In the meantime I am under extreme pressure with my wife breathing down my neck to complete a project I started.

Yesterday I came across this web page and it is so near the bone I couldn't decide if you were the author or if it was your bible :)

http://www.bilderberg.org/monref.htm


hee hee - I have never seen that site, but it is on the money ( excuse the pun ) I don't have a particular bible. Sometime ago I realised I had no idea where money came from or how it was created. So I decided to find out. :)

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Isn't the way money is created by creating debt a bit like Hilbert's infinite hotelrooms paradox?

I only watched the first 10 minutes or so but yes.. it looks like we're living economically in a big bubble that can burst at any time.

By the way... if you want to watch a really interesting documentary about how money is made from nothing, this is the one: Enron, the smartest guys in the room, about the American Enron scandal.
It's sad, funny and unbelievable. It got very high ratings from film critics. Excellent stuff!



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It's actually quite simple.

Just borrow a little of this created money and make it work by investing in an appreciating asset :)

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The Dynamo wrote:It's actually quite simple.

Just borrow a little of this created money and make it work by investing in an appreciating asset :)


It's not quite as simple as that though. Because of "interest" there's always more money to be paid back than is created and loaned out. Which means the economy relies upon people continually borrowing more money to pay back this interest. This is a vicious cycle which requires an economy of infinite growth and constant inflation simply to stay alive.

Even if you as an individual has a balance that is well into the black somebody somewhere is paying interest on that money.

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smeggypants wrote:
The Dynamo wrote:It's actually quite simple.

Just borrow a little of this created money and make it work by investing in an appreciating asset :)


It's not quite as simple as that though. Because of "interest" there's always more money to be paid back than is created and loaned out. Which means the economy relies upon people continually borrowing more money to pay back this interest. This is a vicious cycle which requires an economy of infinite growth and constant inflation simply to stay alive.

Even if you as an individual has a balance that is well into the black somebody somewhere is paying interest on that money.


Actually Smeggy it is that simple in fact it would appear the there is a failure to understand the fundamental principles of debt and how it can be utilised to our advantage.

Just to give an example.

An individual is in need of a home to raise a family, they have only managed to save under great difficulty about 5% of the total cost of a desirable home.

To continue saving it will take years and they will probably never ever be able to buy a home because it could increase in value faster than what they can save.

So the alternative is to persuade someone to loan the balance at a reasonable rate of interest.

This then allows them to immediately have a home which could cost less than the continuing increase in value of the home.

Just another example.

Another individual has a good business plan but no money, they are able to persuade someone to provide the necessary money at a reasonable rate of interest.

This then enables them to spend millions to purchase the capital equipment and employ thousands of folk who will provide a good service to the community.

Also because the business is run at a profit the initial money will eventually be repaid in full.

I have loads more examples but the principle is just the same.

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The Dynamo wrote:
smeggypants wrote:
The Dynamo wrote:It's actually quite simple.

Just borrow a little of this created money and make it work by investing in an appreciating asset :)


It's not quite as simple as that though. Because of "interest" there's always more money to be paid back than is created and loaned out. Which means the economy relies upon people continually borrowing more money to pay back this interest. This is a vicious cycle which requires an economy of infinite growth and constant inflation simply to stay alive.

Even if you as an individual has a balance that is well into the black somebody somewhere is paying interest on that money.


Actually Smeggy it is that simple in fact it would appear the there is a failure to understand the fundamental principles of debt and how it can be utilised to our advantage.

Just to give an example.

An individual is in need of a home to raise a family, they have only managed to save under great difficulty about 5% of the total cost of a desirable home.

To continue saving it will take years and they will probably never ever be able to buy a home because it could increase in value faster than what they can save.

So the alternative is to persuade someone to loan the balance at a reasonable rate of interest.

This then allows them to immediately have a home which could cost less than the continuing increase in value of the home.

Just another example.

Another individual has a good business plan but no money, they are able to persuade someone to provide the necessary money at a reasonable rate of interest.

This then enables them to spend millions to purchase the capital equipment and employ thousands of folk who will provide a good service to the community.

Also because the business is run at a profit the initial money will eventually be repaid in full.

I have loads more examples but the principle is just the same.



You completely missing the point with those examples. Sorry. :) I'm talking about the way the economic system is set up and run not the benefits of loaning money in order to invest it. There's nothing wrong with your examples.

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"Capitalism profits from War - Humanity profits from Peace."


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