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Debt Based Monetary System Question

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[quote name='mansoor_h_khan' timestamp='1298308118' post='2903315']
So, you don't think of the west as being more and more left minded (in McGhilchrist sense) as time has gone on?

You basically disagree with him. correct?

Mansoor
[/quote]

Injin is, according to my observations of him over a long period of time, an example of an individual suffering from an excess of left hemisphere activity, almost to the point of schizophrenia.

Such an individual is dominated by the left hemisphere which is why he excels at making complex semantic argumentation and espouses such a certainty about the nature of 'reality'**. In fact what he is espousing is the symbolic reality created in his left half, which appears to have gone unchecked by the other half for quite some time. McGhilchrist likens schizophrenia to a kind of hyper conscious, hyper-rationalism - existence almost entirely in an abstract symbolic reality, which ironically, is totally removed from actual reality.

I have also never encountered anyone with quite such an extreme denial of the existence of basic social phenomena, which also speaks to a right-side deficit.

Now I may be extremely wide of the mark here and there are many other explanations I am sure but the symptoms displayed certainly fit the description given by McGhilchrist.

** I'm aware of course that the same accusation would be laid by some against me as well

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[quote name='scepticus' timestamp='1298310698' post='2903361']
Injin is, according to my observations of him over a long period of time, an example of an individual suffering from an excess of left hemisphere activity, almost to the point of schizophrenia.

Such an individual is dominated by the left hemisphere which is why he excels at making complex semantic argumentation and espouses such a certainty about the nature of 'reality'**. In fact what he is espousing is the symbolic reality created in his left half, which appears to have gone unchecked by the other half for quite some time. McGhilchrist likens schizophrenia to a kind of hyper conscious, hyper-rationalism - existence almost entirely in an abstract symbolic reality, which ironically, is totally removed from actual reality.

I have also never encountered anyone with quite such an extreme denial of the existence of basic social phenomena, which also speaks to a right-side deficit.[/quote]

But they don't actually exist, do they? :lol:

It's all very well going on about how my brain my or may not work, but if my statements are true then I'm not the defective one, am I? And they are true, as you know.

In any event you are bass ackward, I start from direct sense experience and reject stuff that I can't find within it, whereas the norm is to overlay sensory experience with socially approved fictions and chop bits off that don't fit.
[quote]
Now I may be extremely wide of the mark here and there are many other explanations I am sure but the symptoms displayed certainly fit the description given by McGhilchrist.

** I'm aware of course that the same accusation would be laid by some against me as well
[/quote]
McGilchrist is trying the determinists route of excusing personal horror. His book is fascinating, but his conclusion is set in stone before he embarks, if you read the deep structure it's why he wrote the book to start with.

Alice Miller is much more relevent.

http://www.nospank.net/fyog.htm

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lol - I've been meaning to reply to this thread for days, but since it's fairly quiet down in this forum I figured there was no rush. And then I see an Injin led nine page epic this evening. I feel proud to have provided a platform for this :P

[quote name='jonb' timestamp='1298246654' post='2902332']
You are £1 up, but the borrower is £1 down, so the interest payment is not creating new money.

Where new money is created is when the £10 you lent out is spent by the borrower, and is deposited in the banking system again, creating another £10 available to lend out in addition to the £10 you already have deposited.
[/quote]

But aside from the multiplier effect, the interest payment on my £10 still results in an extra £1, no? Albeit that it is money borrowed from the future labour of the borrower, there is still an additional £1 that has to chase a return in the future? Forget the multiplier effect for a moment - the money supply is growing constantly (in this example in ever smaller increments), and this means an ever growing supply of capital chasing a return - therefore an ever growing increase in the amount of debt required to produce a return?

In that simple example, you would probably have a reasonable ratio of new capital : lost capital due to default. So maybe the money supply would not grow continuously, and might even retain some semblance of balance. Until you introduce fractional reserve as you point out above, at which point the growth becomes exponential.

[quote name='Injin' timestamp='1298247523' post='2902345']
When the money is offered to the banker he should announce that the money is already his. In not doing so is the fraud perpetrated.
[/quote]

Quite. Nicely put.

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[quote name='Injin' timestamp='1298311154' post='2903363']
But they don't actually exist, do they? :lol:

It's all very well going on about how my brain my or may not work, but if my statements are true then I'm not the defective one, am I? And they are true, as you know.
[/quote]

No my dear boy. You have merely constructed an internally consistent abstract picture of the world. You confused (due to the absence for whatever reason of certain key inhibitory functions in your brain), the internal consistency of a limited yet self-consistent logical construct with wider truth.

What your mind has become stuck in is a loop of self referential proof.

You ought nevertheless to be able to see the possibility I outline by accepting the fact that one self consistent logical argument may be contained within another of wider scope, also self consistent but ultimately explaining more than the inner one.

I'm not sure who you went to for advice or what the advice was but at least we have established you can take advice.

So take my advice, and break that loop, because its sending you crazy.

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[quote name='scepticus' timestamp='1298324811' post='2903667']
No my dear boy. You have merely constructed an internally consistent abstract picture of the world. You confused (due to the absence for whatever reason of certain key inhibitory functions in your brain), the internal consistency of a limited yet self-consistent logical construct with wider truth.[/quote]

Nope. I've taken some concepts and then gone out and used the good old scientific method on them, i.e. i've gone and looked.
[quote]
What your mind has become stuck in is a loop of self referential proof.[/quote]

No, i9've gone outside and asked, checked. verified. That's the difference in my position. GO and check yourself. it's easy to do and I am 100% certain you'll get the same result.
[quote]
You ought nevertheless to be able to see the possibility I outline by accepting the fact that one self consistent logical argument may be contained within another of wider scope, also self consistent but ultimately explaining more than the inner one.

I'm not sure who you went to for advice or what the advice was but at least we have established you can take advice.

So take my advice, and break that loop, because its sending you crazy.
[/quote]
Take my advice, and check. Because then you will realise that you are crazy.

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[quote name='Injin' timestamp='1298325624' post='2903682']
Nope. I've taken some concepts and then gone out and used the good old scientific method on them, i.e. i've gone and looked.

[/quote]

well we have both done that and come to alternative conclusions.

The difference between us is you have looked with half your brain and therefore come to a definitive (within your own mind) conclusion of very limited scope and applicability while I have looked with my whole brain and come to something more widely applicable but more ambiguous.

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[quote name='scepticus' timestamp='1298326979' post='2903705']
well we have both done that and come to alternative conclusions.

The difference between us is you have looked with half your brain and therefore come to a definitive (within your own mind) conclusion of very limited scope and applicability while I have looked with my whole brain and come to something more widely applicable but more ambiguous.
[/quote]
ok, so you've gone and checked (to take one example) that countries, towns etc exist and foudn some evidence for them?

Glowing blue lines, perhaps?

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[quote name='Fully Detached' timestamp='1298324706' post='2903666']
But aside from the multiplier effect, the interest payment on my £10 still results in an extra £1, no? Albeit that it is money borrowed from the future labour of the borrower, there is still an additional £1 that has to chase a return in the future? Forget the multiplier effect for a moment - the money supply is growing constantly (in this example in ever smaller increments), and this means an ever growing supply of capital chasing a return - therefore an ever growing increase in the amount of debt required to produce a return?
[/quote]

No, it is just a simple transfer of wealth from borrower to lender. No extra money is created. You might chose to lend it back to him, in which case you get the multiplier effect, unless of course the money was withdrawn from the banking system to pay the interest to you.

Incidentally, you could have the same multiplier effect by lending direct to the borrower without going through the bank.

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[quote name='scepticus' timestamp='1298310698' post='2903361']
Injin is, according to my observations of him over a long period of time, an example of an individual suffering from an excess of left hemisphere activity, almost to the point of schizophrenia.

Such an individual is dominated by the left hemisphere which is why he excels at making complex semantic argumentation and espouses such a certainty about the nature of 'reality'**. In fact what he is espousing is the symbolic reality created in his left half, which appears to have gone unchecked by the other half for quite some time. McGhilchrist likens schizophrenia to a kind of hyper conscious, hyper-rationalism - existence almost entirely in an abstract symbolic reality, which ironically, is totally removed from actual reality.

[/quote]

If that explains why he acts as though he is totally clued up and knows all the answers, but in reality is just a slavering at the mouth ranter and raver, then I concur with the above theory.

[quote name='Fully Detached' timestamp='1298324706' post='2903666']
lol - I've been meaning to reply to this thread for days, but since it's fairly quiet down in this forum I figured there was no rush. And then I see an Injin led nine page epic this evening. I feel proud to have provided a platform for this :P
[/quote]

I think the thread would be better with all the ******** between injin and Mahnoor '[b]vollig ausgelöscht![/b]' Both of them together have vandalised a thread that asked some very pertinent questions with a few pertinent answers being provided. but now any sense/wisdom has been lost amongst the mounds of tat. Edited by Retardstic

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[quote name='jonb' timestamp='1298333856' post='2903823']
No, it is just a simple transfer of wealth from borrower to lender. No extra money is created. You might chose to lend it back to him, in which case you get the multiplier effect, unless of course the money was withdrawn from the banking system to pay the interest to you.

Incidentally, you could have the same multiplier effect by lending direct to the borrower without going through the bank.
[/quote]
You only get the multiplier effect if you accept the money back from some source without telling that source it's already your money. i.e. You lend dave a marked fiver, he gives it to john in exchange for some fags (for example), john hands it to you to look after - and at that point you are supposed to announce it's already your fiver. Dave still needs to pay for his fags, but no longer needs to repay the fiver.

This can be done deliberately or by accident, ofc.

And all this is simply because you can't borrow something and act like the owner of what ytou have borrowed. Or another way, you can't give someone something to do with what they will and also claim it's still yours.

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[quote name='Fully Detached' timestamp='1298324706' post='2903666']
lol - I've been meaning to reply to this thread for days, but since it's fairly quiet down in this forum I figured there was no rush. And then I see an Injin led nine page epic this evening. I feel proud to have provided a platform for this :P
[/quote]

I don't understand why the money supply has to keep increasing. If the bank lends £100 into existence, and you have to give £110 back, you can just shine 110 shoes at a pound each, rather than 100, and pay it back.

It only has to keep increasing, if the borrower is relying on capital gains to pay it back; in that case the house price will have to rise from 100 to 110. Rises in asset prices are an illusion, if everything goes up every year, it doesn't mean we're producing more, we're just inflating the currency. But banks like it, because it gives the illusion of a pay rise every year.

On the gold standard issue, the original standard was fully gold backed. ie for each 100 oz the bank said it had, it had 100 oz. It was WW1 that killed it; after that they only had 60 oz for every 100 oz they were supposed to have.

If you go back to the gold standard now, with all bank debts bailed out, the price of gold is about $15,000 an oz. and a loaf of bread is about $100 or so. I've made those figures up, but it's very high (ie dollars very worthless) because of the scale of the banks debts. The problem is putting the price up to $100 without a revolution. I personally don't think they'll manage it: ie the yanks will start shooting bankers long before it gets to 100 a loaf.

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[quote name='24gray24' timestamp='1322441775' post='3191553']
I don't understand why the money supply has to keep increasing. If the bank lends £100 into existence, and you have to give £110 back, you can just shine 110 shoes at a pound each, rather than 100, and pay it back.

It only has to keep increasing, if the borrower is relying on capital gains to pay it back; in that case the house price will have to rise from 100 to 110. Rises in asset prices are an illusion, if everything goes up every year, it doesn't mean we're producing more, we're just inflating the currency. But banks like it, because it gives the illusion of a pay rise every year.

On the gold standard issue, the original standard was fully gold backed. ie for each 100 oz the bank said it had, it had 100 oz. It was WW1 that killed it; after that they only had 60 oz for every 100 oz they were supposed to have.

If you go back to the gold standard now, with all bank debts bailed out, the price of gold is about $15,000 an oz. and a loaf of bread is about $100 or so. I've made those figures up, but it's very high (ie dollars very worthless) because of the scale of the banks debts. The problem is putting the price up to $100 without a revolution. I personally don't think they'll manage it: ie the yanks will start shooting bankers long before it gets to 100 a loaf.
[/quote]
If I lend you £100 and want £110 back, at the end of the loan I want £110 in front of me.

That's why more must be made.

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[quote name='24gray24' timestamp='1322441775' post='3191553']
I don't understand why the money supply has to keep increasing. If the bank lends £100 into existence, and you have to give £110 back, you can just shine 110 shoes at a pound each, rather than 100, and pay it back.

It only has to keep increasing, if the borrower is relying on capital gains to pay it back; in that case the house price will have to rise from 100 to 110. Rises in asset prices are an illusion, if everything goes up every year, it doesn't mean we're producing more, we're just inflating the currency. But banks like it, because it gives the illusion of a pay rise every year.

On the gold standard issue, the original standard was fully gold backed. ie for each 100 oz the bank said it had, it had 100 oz. It was WW1 that killed it; after that they only had 60 oz for every 100 oz they were supposed to have.

If you go back to the gold standard now, with all bank debts bailed out, the price of gold is about $15,000 an oz. and a loaf of bread is about $100 or so. I've made those figures up, but it's very high (ie dollars very worthless) because of the scale of the banks debts. The problem is putting the price up to $100 without a revolution. I personally don't think they'll manage it: ie the yanks will start shooting bankers long before it gets to 100 a loaf.
[/quote]

I doubt that a new gold standard will be backed 100%. Maybe it will start with fiat being backed, say 20% only.

Using your analogy, if there is not an increase in currency (as debt) then there will not be enough currency in circulation for the shoe shiner to find 110 customers. He will only find 100. Somebody else has to borrow the extra 10 into existence somewhere else, and this goes on and on.

So if the borrowing interest rate is, say 5% apr, the debt has to approximately double every 14 years in order for the monetary system to function properly.

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I am trying to get my head around this system and it got me thinking. If I am fundamentally wrong in my understanding then please feel free to correct me as I am a bit of an economic noob and only realised this week that banks create money in the form of debt. >-<

when a bank loans $100 it creates money out of thin air, almost as if by magic. for the bank to make a profit then that persons "word" that they will pay back the money is transferred to the banks balance sheet and the person who took out the loan (govt or person) then peforms a "function"/work in order to collect the money from the economy and pay back the bank with the amount loaned plus interest. the bank then is a creator of "wealth". however there is a problem because the bank only creates/invents the $100 into the economy but doesnt create the $10(for example) interest that is needed for the person to to pay back the $110 total.

Therefore for this system to keep on successfully generating wealth for the bank and for indivuals, more loans have to be created to other people to give the borrower a chance to "fight" for the 10$interest that they need to find in the economy.So the more loans that are made and the more transactions that are made between people in the economy then the easier it is for more wealth to be created? its like creating millions of hot potatoes of debt that are quickly passed from person to person before someones hands get burnt? This seems to me like a system to keep people working/speculating in order to make the bank money, that they created out of nothing to start with? a few get wealthy at the expense of the majority? It's like a big struggle to fight for the money in the economy, but there is only ever 1 real winner, although some borrowers can aquire a larger share of the money created and therefore they win in comparison to the rest of the population.

If this is the case and governments know this why do governments allow the banks to create money that they then borrow? why dont they just invent the money themselves in the form of loans from the government bank?

Also why do banks need savers cash if they can just invent more? is it because when the bank have reason to believe that there are less transactions in the economy and therefore a greater chance that people who borrow wont be able to get the money from the economy to pay them back. I assume that when this happens the banks require more interest as the risk is greater? But what do banks do then to make money if they refuse to create loans because of the risk? set up some of these hedge fund thingys and repackage and sell the debt on again?lol. maybe I have watched too much CNN.

On a political ideological level then communists, rather than fighting for this money through transactions they would rather share skills so everybody has everything they need? (obv there are massive obstacles for this to work, eg greed) they dont build someone a house in return for money, they do it to recieve something of worth in return? whereas capitalists want to fight over the money that is created?

And finally,

with regards to the gold reserve system/fractional reserve system that seems to leverage new money out of thin air, what will happen when all this new money is "destroyed" when people default and don't pay the bank back, as in the case of Greece? Will the banks own the country and it's assets as a form of security? If this happens then I can see World War 3 happening tbh as I think the whole system underestimates the power of an uprising of millions of people.
Also with this system am I right in saying that we attributed/socially constructed a "worth" towards gold as it was scarce and deemed precious, and exchanged this worth for currencies as "money". if this system collapses and Malthus was right, then maybe its not gold that we attribute a worth to, but what about basic resources as humankind needs these to live and reproduce rather than having gold in a bank.

wow, you got me thinking ;-)

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[quote name='24gray24' timestamp='1322441775' post='3191553']
I don't understand why the money supply has to keep increasing. If the bank lends £100 into existence, and you have to give £110 back, you can just shine 110 shoes at a pound each, rather than 100, and pay it back.

It only has to keep increasing, if the borrower is relying on capital gains to pay it back; in that case the house price will have to rise from 100 to 110. Rises in asset prices are an illusion, if everything goes up every year, it doesn't mean we're producing more, we're just inflating the currency. But banks like it, because it gives the illusion of a pay rise every year.

On the gold standard issue, the original standard was fully gold backed. ie for each 100 oz the bank said it had, it had 100 oz. It was WW1 that killed it; after that they only had 60 oz for every 100 oz they were supposed to have.

If you go back to the gold standard now, with all bank debts bailed out, the price of gold is about $15,000 an oz. and a loaf of bread is about $100 or so. I've made those figures up, but it's very high (ie dollars very worthless) because of the scale of the banks debts. The problem is putting the price up to $100 without a revolution. I personally don't think they'll manage it: ie the yanks will start shooting bankers long before it gets to 100 a loaf.
[/quote]

The money supply has to keep increasing because some refuse to trade in balance, The money gets 'stuck' as it were. 'Inflation' is a very clever way to re-balance the money system. Otherwise you would require disorderly default or taxes by force to transfer it.

The big problem is that 'inflation' generally causes hard assets to rise even faster which means the rich get richer. The ONLY WAYS to stop this part is taxes or default in fact.

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