[bestworkother]

http://www.youtube.com/watch?feature...v=hxdsfa8OFVc#!

[pKgGpUlF]

Good presentation right up until the (another of many fools) fool rolls out the lie that more borrowing is necessary to pay the interest.

Spending is different than the money supply. Spending is a verb, an action acted upon a noun called money. You need money to have spending, but you can't equate money as spending. Nouns do not equal verbs.

THE $100 DOLLAR BILL

It is the month of August; a resort town sits next to the shores of a lake. It is raining, and the little town looks totally deserted. It is tough times, everybody is in debt, and everybody lives on credit.

Suddenly, a rich tourist comes to town.

He enters the only hotel, lays a 100 dollar bill on the reception counter, and goes to inspect the rooms upstairs in order to pick one.

The hotel proprietor takes the 100 dollar bill and runs to pay his debt to the butcher.

The Butcher takes the 100 dollar bill, and runs to pay his debt to the pig raiser.

The pig raiser takes the 100 dollar bill, and runs to pay his debt to the supplier of his feed and fuel.

The supplier of feed and fuel takes the 100 dollar bill and runs to pay his debt to the town’s prostitute that in these hard times, gave her “services” on credit.

The hooker runs to the hotel, and pays off her debt with the 100 dollar bill to the hotel proprietor to pay for the rooms that she rented when she brought her clients there.

The hotel proprietor then lays the 100 dollar bill back on the counter so that the rich tourist will not suspect anything.

At that moment, the rich tourist comes down after inspecting the rooms, and takes his 100 dollar bill, after saying that he did not like any of the rooms, and leaves town.

No one earned anything. However, the whole town is now without debt, and looks to the future with a lot of optimism .

And that, ladies and gentlemen, is how the United States Government is doing business today.

Author Unknown ~

Money supply equals 100, spending equals 500. Amount of spending for one 100 dollar bill is virtually unlimited.

Yet your OP says the money supply has to equal the debt, a patently absurd assertion. You can’t equate spending power of money to total debt. Apples don’t equal oranges.


Another illustration:

Assume an island with only two people, one with nothing and one with all the wealth. The wealthy man has various tools, all the land and assets including 100 gold coins which are the only coins on the island.

Suppose the man with nothing makes a deal with the wealthy man in the hopes of bettering himself. He takes a loan from the wealthy man for 100 gold coins with a promise to pay back 110 gold coins in 5 years. Now it might seem to some that the poor man was fooled because the island only has 100 gold coins and to pay back the loan it would seem there needs to exist 110. However there is actually no problem because work itself has value.

Here is how the impossible loan payback happens:

The man uses his 100 coins loan productively to buy land, tools, etc. from the rich man. He works and produces food and other things of value which he sells to the rich man for 23 gold coins a each year. Each year he pays 22 coins toward the loan and keeps 1 himself. The number of coins always remained the same yet in 5 years the man paid off his 110 coin debt and owns land, tools, and 5 gold coins. The rich man has 95 coins plus the items of value the man produced with his work. The poor man’s work added value into the closed island system that makes up for the loan interest plus more.

People forget that the coins are only representations and storage of work/value–in the end work is what produces the real value.

The little story is also a good example of how not all debt is bad. Productive debt can be good.

[fabrizioitwloch]

Bigjon

The two economic illustrations you posted crack me up, simply because you can’t be serious. If we’re talking about the velocity of money, there are three generalities that we should be able to agree upon. The velocity of money must be constant, increasing or decreasing.

If total money in circulation (MZM) is decreasing, it’s a very easy guess what will happen to the velocity of money, and when the MZM is increasing, so will its velocity. A hurricane or holiday shopping will throw a little blip into the works, but it will all even out over a longer period of time depending on MZM.

I’ll make a long story short, by using another analogy, people can run around as fast as they want, but in the game of musical chairs, every time the music stops, there is still one less chair.

If that didn’t work, try this, MZM is an orange. The velocity of money is an apple. MZM does not increase with velocity.

[JeorgeNoxeref]

Bigjon

The two economic illustrations you posted crack me up, simply because you can’t be serious. If we’re talking about the velocity of money, there are three generalities that we should be able to agree upon. The velocity of money must be constant, increasing or decreasing.

If total money in circulation (MZM) is decreasing, it’s a very easy guess what will happen to the velocity of money, and when the MZM is increasing, so will its velocity. A hurricane or holiday shopping will throw a little blip into the works, but it will all even out over a longer period of time depending on MZM.

I’ll make a long story short, by using another analogy, people can run around as fast as they want, but in the game of musical chairs, every time the music stops, there is still one less chair.

If that didn’t work, try this, MZM is an orange. The velocity of money is an apple. MZM does not increase with velocity.

All I'm trying to convey is that money can be spent multiple times.

Actually velocity only increases when people lose their faith in the money and seek to get rid of it as fast as they can.

[pKgGpUlF]

Bigjohn, you're $100 bill story is a nice story, but a story is all it is.

What happens when the hotel proprietor, Butcher, pig raiser, supplier of feed/fuel and the prostitue all take a portion of the "money" they receive and pay it to the bank as principle on their loans?

I'll tell you what happens, the $100 bill gets used up and disappears back into the thin air from whence it came.

The problem is that the $100 bill itself came into being via debt and is owed back plus interest. The only way a system like that works is if there is an increase in borrowing as time goes on, sufficient enough to maintain the growth in the "money" supply in order to make up for old loans being paid off.

Your analogy would be more fitting of a gold standard monetary system that uses full reserve banking. Which is a far cry from what we have today.
...but I still keep hearing that "$100 bill" analogy from people to supposedly explain our economy.

Wrong, my second example proves that it is possible to pay a 110 coin debt with 100 coins. Just substitute dollars for coins, it works the same way.

Paying is an action a verb. Money is a thing a noun.

You want to claim that paying has to equal money.

[JeorgeNoxeref]

I never said it can't be used multiple times, it can be. That is, right up until someone uses it to pay their principle with.

In your analogy, had the pig farmer paid his debt to the bank instead, the $100 bill would be gone and the hotel proprietor would have ended up being charged with theft.
ie your analogy assumes that the "money" can circulate foever, being spent from person to person to infinity.....but it can't be in a debt money system like we have today.

Well that is a nice assertion, but I want to see the law that backs it up.

As long as there are treasury bonds, there will be dollars.

[gechaheritt]

Is Velocity Like Magic?

http://mises.org/daily/918

[pKgGpUlF]

It's called fractional reserve lending. As "money" gets spent into circulation via loans having been made, those loans at some point come due. As people with loans start paying back the "money" they'd borrowed in the past, it removes "money" from the pool of "money" we all use.
It gets replenished by new loans being made and that new credit "money" being spent into circulation.
...and then the cycle repeats constantly until the point of debt saturation is reached.

Are you saying you don't understand how our "money" that we all use is created?....and later extinguished?

Sure, I understand how it works. The principal portion of the payment erases that portion of the debt and the interest portion is spent back into the economy where it balances the equation of where the money comes from to pay the debt plus the interest. The interest money always stays in the system along with the remaining unpaid balance of the loan.

[pKgGpUlF]

Is Velocity Like Magic?

http://mises.org/daily/918

Very interesting, but I don't think you can bottle peoples emotion in a formula. I think the formula probably works as long as people have faith in the currency and when their faith is shaken and they try to get rid of dollars for anything not dollars the equation will go boom.

[wrenjmerg]

Basically all those stories describe is a god like all powerful deity using an unfair advantage to parasite off his neighbor. The person doing the actual work is the only one contributing anything of value to those around him.

Compound interest is an insidious reality that degrades the quality of life for everyone participating in it.

All you need is a money system without debt, and compound interest baked in by default, and people wouldn't have to run around paying off the debt balloon in the first place, which all trickles up to the one who sits back doing nothing.

It's not too hard to comprehend one craftsman/tradesman/farmer/intellectual/butcher/baker/doctor etc... can use a non parasitic money system to engage with another to get the tools he needs to better himself. In reality nobody needs the do nothing parasite with the gold coins to better their lives.

If a unit of work = value, then by default the one at the top doing no work = no value.

[pKgGpUlF]

Basically all those stories describe is a god like all powerful deity using an unfair advantage to parasite off his neighbor. The person doing the actual work is the only one contributing anything of value to those around him.

Compound interest is an insidious reality that degrades the quality of life for everyone participating in it.

All you need is a money system without debt, and compound interest baked in by default, and people wouldn't have to run around paying off the debt balloon in the first place, which all trickles up to the one who sits back doing nothing.

It's not too hard to comprehend one craftsman/tradesman/farmer/intellectual/butcher/baker/doctor etc... can use a non parasitic money system to engage with another to get the tools he needs to better himself. In reality nobody needs the do nothing parasite with the gold coins to better their lives.

If a unit of work = value, then by default the one at the top doing no work = no value.

Yes, in an ideal world where all people are altruistic your system will work just fine. Let me know when you find such a place?

In the mean (pun intended) time, if you were to ban the payment of interest you would find that the people who had nothing and needed and wanted money would be begging those who had money to lend them some with the promise to pay anything for the privilege.

[JeorgeNoxeref]

The principle portion goes away and isn't avaliable again until someone else takes out a loan. That's what happens when a debt to the bank gets erased....the principle loaned gets erased and the bank spends the interest.

The point I was getting at is if each of your people in the analogy take $20 to pay their debt to the bank, {lets say $10 interest and $10 principle} there's only $80 to pass on to the next person in your analogy. If each person kept doing that, $50 of the original $100 would be earned by the bank as interest, and the other $50 would become unavaliable in the economy until someone else borrowed it to spend back into circulation.....you left that part out of the analogy.
ie you assumed that no one had a debt to the bank to payback.

I left nothing out.
No one had a debt to pay the bank in my analogy

This is your analogy and has no bearing on what I said.

Your analysis is flawed in that you are now trying to impose a debt to the bank on these poor people where none existed before. If each person owed the bank $20, each person would only need $20, not $100, not 80. After they have paid they only need $50 to finish off the total debt as each of their debts is now $10 and as you said there is 50 dollars in this system.

[jimmy28]

So your analogy wasn't based upon real-life in America today, then was it?


What you used as an analogy would've been more appropiate to understanding how a debt-free monetary system would work. ie the money circulates virtually foever, from person to person to person without ever being extinguished by any of the parties using it to pay off the principle of a loan.

[pKgGpUlF]

So your analogy wasn't based upon real-life in America today, then was it?


What you used as an analogy would've been more appropiate to understanding how a debt-free monetary system would work. ie the money circulates virtually foever, from person to person to person without ever being extinguished by any of the parties using it to pay off the principle of a loan.

It seems that these illustrations have to be exceedingly simple for simple minded people and even then they are not simple enough for some JOE.

The principal that is extinguished is no longer needed to pay the remaining portion of the loan. Especially a real world fractional reserve loan.

[JeorgeNoxeref]

Right, that "money" goes away, unable to be used within the economy until it is re-loaned.

Again, in the real-World the $100 bill would have never made it back to the hotel proprieter because at least one of the people in your analogy would've had bank debt and used it to pay off their loan.
Once that happens, how does the $100 bill get back to the hotel?

That is what you claim nevertheless none of these people owed anything to the bank and the 100 bill just proves money can be spent over and over by many different people.

The fraction that is the reserve is not extinguished. If you want to talk about a fractional reserve loan you have to establish a reserve. Without it there can be no loan and no examples.

[wrenjmerg]

Yes, in an ideal world where all people are altruistic your system will work just fine. Let me know when you find such a place?

In the mean (pun intended) time, if you were to ban the payment of interest you would find that the people who had nothing and needed and wanted money would be begging those who had money to lend them some with the promise to pay anything for the privilege.

Why should anyone have nothing? Everyone born into this system would have what they need to survive by family alone because the generations before them weren't financially raped into poverty by the parasite. Families would own land, have actual wealth from their labor, and be able to help their own, and their neighbors instead of it being perpetually drained off to private corporations by design.

If you do have lazy people that don't want to work, then they take that pill. The pill should not be by default. Nobody has a choice today, as you need to get into debt to get anything basic today. Education being the first stage of financial rape, then it snowballs from there.

[JeorgeNoxeref]

Basically when you borrow money from a bank all you get from thebankster is an entry into a ledger crediting your account with xx.xx FRN’s(never to be confused with dollars (which is a weight and purity of silver)).That entry is what is called money in our system and those numbers are passedaround by depositing and cashing checks as in checkbook money. He doesn’treally lend you anything although he may have to pony up the real cash for atime until he gets his cash flow problems straightened out. At the end of theday our bankster totals up the deposits and withdrawals and if the deposits aregreater he has money to put up for the overnight money market and conversely ifthe withdrawals are larger he has to borrow FRN’s (prime money) to make hisbooks straight.



I haven’t borrowed any money for a long time but the way I rememberthe process is I want to borrow $100,000.00 and the bankster says fine butfirst I”ll need some earnest money to show your good faith… so if you’ll put up10% or $10,000.00 and sign these mortgage papers against this piece of propertyyou want I’ll be glad to “give” you $100,000.00.
In order for the banker towrite the number 100,000.00 in your new account he must first place on reserveprimary Federal Reserve Money which are usually FRN’s which are held on accountat his Fed bank or held as vault cash. http://www.federalreserve.gov/moneta...req.htm#table1



: A 3% reserve means they can multiply the prime money 33 times andthat is what I call BIG inflation Each and every loan is an expansion of themoney supply which leads to TOO much money.





This is NOT ROCKET SCIENCE

Each month you make your payment and each month the banker spendsthe interest portion back into the economy. The running total of all theinterest is what the banker spent back into the economy. To me thisamortization table clearly illustrates that all the money necessary to pay theloan and the interest is included in the original amount of the loan via thestructure of the repayment schedule.



You need to imagine another column called “the monetary economy”and into that column goes your check when you cash it for the cabin/boat/x thatyou have already signed a mortgage against and is held by the bankster.

1. cash check and our “economy” has $100,000.00.
2. make first monthly payment of $665.30 and our economy has $99,334.70
3. Bankster takes his cut first and spends money into “economy” which now has $99,918.03 (its magic it exactly matches the balance that you owe).
4. make 2nd monthly payment of $665.30 and our economy has $99,252.73
5. bankster takes his cut first and spends money into “economy” which now has $99,252.73 PLUS $582.86 EQUALS $99,835.59 (more magic it matches your balance again)
6. make 3rd monthly payment of $665.30 and our economy has $99,170.29
7. Bankster takes his cut first and spends money into “economy” which now has $99,170.29 + $582.37 = $99,752.66 (Damn I’m beginning to see a pattern here… Question really is, how many more iterations of this illustration are necessary for joking trolls?).
8. And as we proceed through all 360 payments the money in our “economy” exactly mirrors the unpaid balance of your loan and all along the way the primary FRN’s that were used as reserves are being freed up to add to our “economy”. The Bankster needs to keep a 3% reserve of primary money (FRN’s) to match you loan balance.

There are two different forms of money in our monetary system,primary money which is mainly Federal Reserve Notes (cash) or money of exchangeand demand deposit accounts which are ledger entries in a book. Demand depositmoney or money of account, must be backed by reserves of money of exchange heldon account with the Fed or held as vault cash according to the amount of moneyeach bank has in demand deposit accounts. 0 reserve for banks with less than 6million, 3% reserve 6 to 48 million and 10% demand deposit>48 million. Theaverage bank needs a 3% reserve and sells it’s loans as CDO’s to stay in thatbracket.



But since you insist that there isn’t enough money to pay the loan…would you point out the point in the amortization table where we run out ofmoney to pay the loan?



I always love you guys who insist they didn’t create the money topay the interest… if that is so, then each and every new loan creates a greatershortage of money and when you have a shortage of a commodity its value goesup. Woopee it’s the fountain of wealth create new loans and drive up the valueof money.

[pKgGpUlF]

I agree that it shows money can be spent over and over. I agree too that it can be, but my whole point was that the analogy used is not a representation of how our current monetary system works.

Your analogy stated that it is tough times, everybody is in debt, and everybody lives on credit. If so, they'll have bank debt and would've invariably used some of that $100 to pay the bank back. {as would happen in our society today}

Therefore the analogy doesn't reflect reality. Although it is a nice story about how it might have worked in , say, 1880 or somethin'.

Sure it represents reality in tough times banks don't lend to anyone except those who don't need it.

[pKgGpUlF]

Why should anyone have nothing? Everyone born into this system would have what they need to survive by family alone because the generations before them weren't financially raped into poverty by the parasite. Families would own land, have actual wealth from their labor, and be able to help their own, and their neighbors instead of it being perpetually drained off to private corporations by design.

If you do have lazy people that don't want to work, then they take that pill. The pill should not be by default. Nobody has a choice today, as you need to get into debt to get anything basic today. Education being the first stage of financial rape, then it snowballs from there.

That is a good point. We do have a bad parasite infestation.

[JeorgeNoxeref]

In the tough times, people would still have debts from the previous good times.
...and will therefore continue trying to make payments on that debt.

In your post above you start off with a $100,000 economy that continues to shrink unless some new person takes out a new loan to spend into circulation. Which ultimately means that many people will have debts to pay, and as that $100 bill in your first analogy gets passed around, portions of it will be extinguished as people pay back their principle.

How does the $100 bill get back to the hotel if at some point along the way it gets used to pay off a $90 loan plus $10 interest to the bank? At that point the bank can spend $10 back into circulation.
The only way to get the $90 back in circulation is for someone else to ask for a $90 loan again and then for them to spend it.

Your seem to be worried that there is not enough money in our system. In the real world system the problem is there is too much money causing inflation.
In each of these examples there is enough money to service the respective loans. That is all the money that is necessary.

If you want to talk about fractional reserve loans, you have put up a reserve on which to base your expansion on the money supply.

No resereve, no loan.