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markinspain

Money As Debt Ii

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Because of the rubbish about because interest is charged there is more liabilities than money and the money supply will have to keep growing to pay the ever cumulating interest.

it goes through that in more detail, make a better case for it.

Undecided myself - I think that the debts can be wiped out entirely and easily. It's largely a choice for the bankers.

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Because of the rubbish about because interest is charged there is more liabilities than money and the money supply will have to keep growing to pay the ever cumulating interest.

I didn't understand how they got there either but didn't dismiss it as wrong.

I thought that if we deposit money and expect interest then banks owe more than the principal ammount. But since the bank lend out that money, and possibly a good percentage more, and charge interest (typically much higher than paid for deposits) then the interest owed on the principal ammount by the bank would be significantly less than it charges debtors. The result of which leaves the bank in profit by the difference in interest charged and paid.

Does that make sense or am I way off?

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Guest DissipatedYouthIsValuable
I've only seen the first and it has already mentioned this fallacy which it is guilty of spreading.

Remember everyone, ASSETS always equal LIABILITIES. The system balances.

The debit interest on loans albeit created out of thin air, also goes to pay wages, costs and depositor interest which are also all created out of thin air.

Loans are settled from the value created from trade (wages, profits and taxes). All the loans in the world can be settled with a £1 coin if it circulates quickly enough.

Doesn't appear to work that way though does it?

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I've only seen the first and it has already mentioned this fallacy which it is guilty of spreading.

Remember everyone, ASSETS always equal LIABILITIES. The system balances.

The debit interest on loans albeit created out of thin air, also goes to pay wages, costs and depositor interest which are also all created out of thin air.

Loans are settled from the value created from trade (wages, profits and taxes). All the loans in the world can be settled with a £1 coin if it circulates quickly enough.

Watch the rest of them.

(Your point about the £1 coin is cobblers. You can't pay a £1.01 debt with it.)

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Using the standard equation gdp = mv, liabilities are created by trade on the left hand side. The money supply is on the right. The liabilities are settled by the money supply m circulating in the economy. There are always more liabilities than money in the economy. Interest can simply be thought of as the charge for borrowing money - and therefore it is a liability like any other trading liability residing on the left hand side of the equation.

You owe me £100 which I am going to burn because I am perverse like that.

Not possible to pay me with a £1 coin.

Really silly idea, no clue why people fall for it.

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It might take me a hundred trades but if you want paying what I owe you , you need to allow me to bring our trading account back into balance - or I think I'll either default or go and mint some more.

No, really.

I want £100 in cash, in my hand.

Then I am going to burn it. There is no velocity that will do this with a £1 coin.

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If that's the way you want to play it. I'm defaulting. By the way, I'm America and you're China. Come and get it.

Then you haven't paid he bloody debts back, have you?

You : It's possible to pay all debts with a very fast £1 coin.

Me : - no because I want a pile of money.

You : So I default, ****** you. This means that all debts have bene repaid with a £1 coin.....oh hang on...

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fixed

If you want your money, you'll have to come round to my way of thinking sometime.

I want my £100 in a pile. Borrowe - he be servant to the lender, not the other way around.

Really, why persist in this crap?

Tell you what - go and find someone who will accept the same £1 ten times when you owe them a tenner, then come back to me.

Best of luck. :rolleyes:

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Really? That's news to me boy. Come and get it.

The bailiffs will be along shortly for your stuff, which they will sell to get me my £100.

In full, in cash, as I want it.

Found anyone yet?

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I don't have any 'stuff'. I've only got this multi headed nuclear weapon. Open your mouth.

So you haven't paid the debts back with a £1 coin.

Marvellous.

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You haven't been reading have you? Or rather you are trying not to read so you can hold by your fallacious ideas.

Willingness to trade in balance is the key and as you are not prepared to undertake trade on such terms, you cannot, in the long run, be paid. Whether that be because I am more powerful than you (America) or because I simply do not have the wherewithall (Africa) after I had sold everything that I had that could have allowed me to repay you.

EDIT: Beddy byes. Nite nite.

You said you can repay all debts with a £1 coin.

This is ********, you know it's ******** and having been shown it's ******** you are on about africa and nuclear weapons.

Night.

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I've only seen the first and it has already mentioned this fallacy which it is guilty of spreading.

Remember everyone, ASSETS always equal LIABILITIES. The system balances.

The debit interest on loans albeit created out of thin air, also goes to pay wages, costs and depositor interest which are also all created out of thin air.

Loans are settled from the value created from trade (wages, profits and taxes). All the loans in the world can be settled with a £1 coin if it circulates quickly enough.

Reality and theory do not coincide in this case.

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Using the standard equation gdp = mv, liabilities are created by trade on the left hand side. The money supply is on the right. The liabilities are settled by the money supply m circulating in the economy. There are always more liabilities than money in the economy. Interest can simply be thought of as the charge for borrowing money - and therefore it is a liability like any other trading liability residing on the left hand side of the equation.

I agree that with high enough v, a single circulating £1 coin could pay off all debts -- but only if demand within the economy supports the required rate of transactions. The more money that's lent at interest, the higher the velocity of money must be in order to balance the books. Higher velocity of money = more economic activity, i.e. growth.

Consider what happens to debt-service in a shrinking economy.

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I've only seen the first and it has already mentioned this fallacy which it is guilty of spreading.

Remember everyone, ASSETS always equal LIABILITIES. The system balances.

The debit interest on loans albeit created out of thin air, also goes to pay wages, costs and depositor interest which are also all created out of thin air.

Loans are settled from the value created from trade (wages, profits and taxes). All the loans in the world can be settled with a £1 coin if it circulates quickly enough.

assets do equal liabilities.

even in a terminally bankrupt firm.

just because a banking system EXPECTS interest to be paid does not mean it will or even can be.

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Guest DissipatedYouthIsValuable
Never mind the interest, the bank HOPES that the principal will be paid too.

And if they don't there is always a fall back position.

I don't know of a situation where in fact the accounting system won't balance.

Why don't you stop all this shite and pass a load of pound coins to me?

I'll see to it that they're passed on speedily.

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Never mind the interest, the bank HOPES that the principal will be paid too.

And if they don't there is always a fall back position.

I don't know of a situation where in fact the accounting system won't balance.

Which is another fine reason to never repay any of the bankers entirely imaginary "debts."

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Never mind the interest, the bank HOPES that the principal will be paid too.

And if they don't there is always a fall back position.

I don't know of a situation where in fact the accounting system won't balance.

OK, lets look at the CB model.

a CB lends its promisary notes to bank A that has issued a bond paying 10%.

lets suppose this is the only transaction in the world.

what can the CB expect back? the notes...Plus interest? where will the interest come from?

the books balance at the CB

asset = notes issued, liability = bond secured.

now come year end interest is due.

add the invoice for interest to the clients balance.

assets= notes issued + interest, liability = bond secured plus Profit to shareholders.

still balance, but there is no hope in hell that the interest could be paid.

Or maybe an analogy will help illustrate my point.

a water collector lives in a bath. he has all the water.

a drinker arrives and wants water, the only thing of value in this closed world.

the collector offers all the water to the drinker providing the drinker gives bakc all the water and 10% more in a years time.

the drinker agrees and moves into the bath, the collector dries off.

without adding more water to the system, the drinker cant add extra. the extra would come from somewhere else.

Edited by Bloo Loo

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My daughter has just been learning about the water cycle and I can assure you from their pretty diagrams that the water does not disappear although it does seem to from time to time.

And there is no concept of interest in such real world systems.

If the drinker of the water is unable to replace the water plus the extra required as a charge, then they will simply have to default. That is all there is to it. The person in the bath who thought they had an asset in terms of the original water drunk plus the extra amount will simply have to be written off to experience if he has made such a foolish loan of water that cannot be replenished.

The cistern balances.

so, money required to repay the interest cannot exist in the original tranch....another must come to fufil the debt.

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You know that is not true Bloo Loo.

Just as interest liabilities can be created from nothing so can value in the form of trade...taken out as profit/dividends, wages for work or even taxes.

That is how those interest liabilities 'created from nothing' can be settled. But if the debtor does not have the means of repaying the debt then default they must. Clearly indenture or being a wage slave is one step up from default.

the point is if all the money issued as debt is lent, and interest is charged. then to pay the interest, more money is needed than originally issued, and how is it issued, by arranging more debt.

or there is a default rate of at least the interest due.

the films point (MK1) was that defaults are a natural consequence, and to avoid default required the ever increasing issuance of money, naturally leading to inflation and transfer of wealth to the banks.

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