Fausty's Libertarian Blog: Money as Debt, version II: unsustainable and fraudulent monetary system

Friday, 30 October 2009

Money as Debt, version II: unsustainable and fraudulent monetary system

Hat tip to Captain Ranty for this find - Money as Debt version 2.

Why is this not taught in secondary schools?

Because the government and bankers have a mutually beneficial relationship.

They want us to be good little consumers and pile up debt, from which they benefit. They have nothing to lose. We have everything to lose.

Please circulate this widely and feel free to copy this posting.

8-part autoplay:

7 comments:

Captain Ranty said...: 'preciate the H/T Mr F.

I feel cheated. If I had known this stuff years ago it may have made a world of difference to my life.

Hopefully people will persevere and beef up on it.

CR.; 30 October 2009 18:53
Captain Ranty said...: I was told that you were a Mrs.

I am sorry for assuming you were a chap.

CR.; 30 October 2009 20:11
Fausty said...: Same here, CR. Economics lessons don't seem to provide these fundamental truths!

No worries, about the Mr - how could you have known? :); 30 October 2009 20:39
Mark Wadsworth said...: Dear F,

Money IS debt, it is the same thing, you can't have 'money' without an equal and opposite 'debt' somewhere else.

OK, let's assume that it is illegal to ever owe anybody anything, and everybody has to trade by barter on the spot.

Next, assume that you give me a cow today and I promise you two sheep next week. I owe you two sheep (and thus I have a debt) and you have an asset (my promise to pay you two sheep). Even though you do not yet have the physical sheep, you are still 'wealthier' than somebody else who isn't going to receive two sheep next week.

We can all understand the idea that everything belongs to somebody. So for the next week, to whom do those sheep 'belong'? They are on my farm, but I have to hand them over to you, so economically they are yours.

It is no different with 'money', only instead of me owing you two sheep, I owe the bank £100,000.

But don't forget that banks are just middlemen. They have to borrow the money from somewhere else, i.e. from you, the depositor who has deposited the £100,000 with them. So the bank owes you £100,000.

As and when I pay off the bank, it repays you and the 'money' all disappears as if by magic.

To sum up, it's not the banks we need to worry about (supervise properly because they are like naughty teenagers, yes) it's the credit bubbles that they create, and they can only create credit bubbles by lending ever larger amounts of money on exactly the same assets, i.e. houses.

On the other side, we have the Home-Owner-Ists who have this insane belief that house prices can only go up and a government whose entire economic policy is based on making them go up. They are the ones who make it so easy for the banks to create credit and asset price bubbles.

If we awoke from this madness and wanted house prices to be low and stable, it would be dead easy to do this (by taxing land values a bit more and incomes a lot less, for example), hey presto, we've fixed both problems (to the extent they can be fixed, of course).; 30 October 2009 22:11
banned said...: I must be a bad person because I don't owe anybody anything. No cedit card debts, no mortgage, no HP, no bank loans or overdrafts and I sorted out the pimp last week.

The easiest way to stabilise house prices would be to insist on Max Mortgages of 3.5X average earnings, house prices would fall and then stay falled much to the chagrin of wicked bankers who financed and profited from the housing boom.; 31 October 2009 00:19
Fausty said...: Mark, I take your point about IOUs - they will always exist; they are natural to humanoids.

Our fiat monetary system has corruption built into it. As you say, it could not exist but for government patronage, and corruption has been found to be prevalent via the revolving doors syndrome. Credit bubbles are beneficial to government (short-term) because they fuel spending, which is taxed.

Bankers surely gain a substantial portion of their wealth from defaulters, in that they get to acquire properties, risk free. It doesn't matter to them whether the defaulter's property is worth less than the mortgage, because they've not actually risked any money in financing its purchase. Where risk existed, credit default swaps were designed to cover them. Where CDRs failed, the government was the lender of last resort, to bail out the b@stard casino bankers.

That the government is giving these banks guarantees is outrageous. They can't lose! We're the losers, every time.

The relaxation of the 3x rule was evidently the cause of the crisis, transnationally.

I'm coming around to your view of LVT. It certainly should be debated, but because there are so many vested interests infesting the govenrment, I doubt it will be.

What will it take to implement LVT?; 31 October 2009 01:23
Fausty said...: Wise, Banned. If Celente is correct, those of us with loans have approximately one year to reduce our debt, or be buried by it.

Should inflation reach Reich heights, we might well see interest rates soar to 20%+ (within 2 years) to pay back debt.

That would wipe out much of the property-'owning' middle class.

Oh, and the Tories will be blamed for it, despite it being aproblem entirely of Labour's making.; 31 October 2009 01:29