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The Debt Based Economic System


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Do you remember that excellent post you put up a couple of months ago about the NHS? If I recall the underlying logic was that the NHS is now being used as a tool to control people. Because we all have a stake in it, some people believe that they have the right to limit the life choices of others because they'll end up paying for the consequenses if it all goes wrong.

Well I can't help but draw parallels with a lot of thought on banking reform. Because we all need to use the national currency so the logic goes, we also have the right to veto people because their activities might overspill and then have an impact on us. Currency should be no more used as a tool of control any more than the NHS, and that means allowing people to gamble with their money if they choose.

Yes, I think there are similar parallels (hadn't thought of it like that before). The problem is if the financial system was the NHS, the bankers would be the ones binge drinking, smoking 50 a day, while rock climbing each weekend, with their day job as a stunt man! ;) The banking sector gets to take all the risk, enjoy most the benefits (we get some interest, they get the Aston Martins), but then gets to leave us with the tab, should it go wrong.

The difference between oil, food and land is that the first two can;

1) Be increased so that the supply meets the new demand

2) Be substituted, so that people start eating bread instead of rice for example

3) Have their levels of consumption reduced so people simply use less of them.

So if oil goes up in price we either use less of it by car sharing for example or walking more, we switch over to other forms of transport such as nuclear powered trains, or we start mining resources that were previously uneconomical. The land market doesn't really work like this, there are no substitutes and there is no physical way of bypassing the land monopolists in the same way that we can avoid using the services of the oil producers or rice farmers. This gives landlords a unique ability, they have to be paid off before we're allowed to produce anything, and this force alone gives the land market a rare 'power' that no other asset class or commodity benefits from. Hence it becomes very expensive if left untaxed.

Sure, I don't argue with this - the limited supply of land causes unavoidable problems (without LVT).

I do advocate personal responsibility though, if people want to lend their money to the bank they should understand that there's risk involved and that they could lose the lot if things go bad. The risks need to become more obvious so on aggregate we take less of them, or at the very least understand the consequences a little better.

This is one of my driving points for requesting reform. It isn't about whether it is fraud/right/wrong etc, it's about whether the risk is being appropriated in an effective way. The current system relies on growth (or at least stasis), which just seems brittle to me. It means inflating the currency to pay for poor investment choices or banking meltdown; not great choices. Risk needs to have consequences and we either must let failing banks go bankrupt (no bailouts) or we need to reassign risk to individuals (no systemic risk). The former is politically unpalatable, which makes me think the latter is the best choice (like with LPB).

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Yes, I think there are similar parallels (hadn't thought of it like that before). The problem is if the financial system was the NHS, the bankers would be the ones binge drinking, smoking 50 a day, while rock climbing each weekend, with their day job as a stunt man! ;) The banking sector gets to take all the risk, enjoy most the benefits (we get some interest, they get the Aston Martins), but then gets to leave us with the tab, should it go wrong.

Sure, I don't argue with this - the limited supply of land causes unavoidable problems (without LVT).

This is one of my driving points for requesting reform. It isn't about whether it is fraud/right/wrong etc, it's about whether the risk is being appropriated in an effective way. The current system relies on growth (or at least stasis), which just seems brittle to me. It means inflating the currency to pay for poor investment choices or banking meltdown; not great choices. Risk needs to have consequences and we either must let failing banks go bankrupt (no bailouts) or we need to reassign risk to individuals (no systemic risk). The former is politically unpalatable, which makes me think the latter is the best choice (like with LPB).

I think we've reached a shaky consensus! Excellent B)

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This issue gets raised time and again,

The land cartel, not the money cartel acts as an unavoidable barrier which robs the productive of their wages and keeps them in the shackles of debt. When you take out a mortgage the money doesn't go to the bank, it goes to the previous landlord.

but this is much too subtle for many to grasp.

Half right - where does 30+ yrs of Mortgage Interest, forced building Insurance and other charges end up?

Local charity??

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Land isn't a market, it's a protection racket - an extortionist ring.

Once you realise that, the problem and the solutions become obvious and they don't include making the extortion official by land taxes!

The same is true of our "debt based" monetary system. There nowt wrong with getting into debt, but the idea that getting into debt creates anything is obvliously incorrect and fraudulent. The idea that coloured paper or PC numbers have incredible value is also complete shit.

But then it's the exact same thing as the land issue - an extortionists ring, a protection racket.

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Land isn't a market, it's a protection racket - an extortionist ring.

Once you realise that, the problem and the solutions become obvious and they don't include making the extortion official by land taxes!

The same is true of our "debt based" monetary system. There nowt wrong with getting into debt, but the idea that getting into debt creates anything is obvliously incorrect and fraudulent. The idea that coloured paper or PC numbers have incredible value is also complete shit.

But then it's the exact same thing as the land issue - an extortionists ring, a protection racket.

"Green BELTS" are all part of the Extortionist 'RINGS' (weapons) in disguise!

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Land isn't a market, it's a protection racket - an extortionist ring.

Once you realise that, the problem and the solutions become obvious and they don't include making the extortion official by land taxes!

The same is true of our "debt based" monetary system. There nowt wrong with getting into debt, but the idea that getting into debt creates anything is obvliously incorrect and fraudulent. The idea that coloured paper or PC numbers have incredible value is also complete shit.

But then it's the exact same thing as the land issue - an extortionists ring, a protection racket.

You believe in free markets, right? So why the objection to paying full market price for a lovely plot of land?

It is a racket. yes you're correct. But it can be made less of a racket if we recognise that every citizen has an equal claim to all the land in their territory. If we expect them to surrender some of their rights then they should be fully compensated at market rates.

Edited by chefdave
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You believe in free markets, right? So why the objection to paying full market price for a lovely plot of land?

Because you can only buy and sell real things.

Arbitary delusions of the human mind have to be backed by either voluntary agreement or violence.

It is a racket. yes you're correct. But it can be made less of a racket if we recognise that every citizen has an equal claim to all the land in their territory. If we expect them to surrender some of their rights then they should be fully compensated at market rates.

No such thing as citizens - the answer to the problem os violence backed fantasy is not more fantasy or more violence.

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Because you can only buy and sell real things.

Arbitary delusions of the human mind have to be backed by either voluntary agreement or violence.

Well the empirical evidence proves otherwise. People do buy and sell land so it does have a market value, this price doesn't need to be backed up by force because it exists in the real world transactions between people.

No such thing as citizens - the answer to the problem os violence backed fantasy is not more fantasy or more violence.

The problem wasn't violence backed fantasy though, the problem was debt. The solution to systematic debt is to lower systematic costs, that can be achieved with LVT.

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Well the empirical evidence proves otherwise. People do buy and sell land so it does have a market value, this price doesn't need to be backed up by force because it exists in the real world transactions between people.

No, they buy and sell rights to extortion and imposition.

The problem wasn't violence backed fantasy though, the problem was debt. The solution to systematic debt is to lower systematic costs, that can be achieved with LVT.

You can only have money as debt if you have a coercive monopoly on a worthless item as money.

And you can't solve any problem by giving a handful absolute power to tax - they will get hat power, and instantly start taking the piss with it. There are no humans who you can give that much power to who will not instantly abuse it.

The problem is violence and threats - they need to become socially disapproved of.

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A credit based money system allows imbalances to persist, develop and grow before their inevitable bust.

It is a sticking plaster for those without money to pretend they have money. And unless they realise its purpose is to generate a return gretaer than the interest charged rather than for consumption, there will always be blow ups where the interest burden becomes unsustainable. It is a very good system badly used.

This isn't true. When people make repayments on debt the future interest burden is lowered. This means people have to perform less work in future and will still be able to service the debt.

The interest doesn't cause the bust, the total debt burden does.

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No, they buy and sell rights to extortion and imposition.

Well thats part and parcel of the land market, but we still need access to land and land will always command a market price. What I'm suggesting is that instead of pretending that this price doesn't exist we recognise it and use it to our advantage.

You can only have money as debt if you have a coercive monopoly on a worthless item as money.

And you can't solve any problem by giving a handful absolute power to tax - they will get hat power, and instantly start taking the piss with it. There are no humans who you can give that much power to who will not instantly abuse it.

The problem is violence and threats - they need to become socially disapproved of.

I'm not giving them absolute power to tax, I'm advocating taxation based on the principles of the free market and limiting their powers at the same time. That means if they get greedy and overtax, they simultaneously destroy the tax base they're working from as they impoverish the economy.

The system will never be perfect, and they'll always be a certain amount of corruption going on whether it be in the public sector or the private. But if there are certain rules we can adopt which will lower the chances of widespread corruption and abuse then I think we should give them a try. If it fails then fair enough, we can try something else. But going from here, to a position where we have no state and no corruption or violence is a little far fetched imo. It would be a bit like abolishing crime by getting rid of all laws, yes technically there would be no crime because we refused to recognise it or do anything about it, but on average peoples would be much worse off.

Edited by chefdave
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That doesn't make sense to me. Can you explain?

The other aspect to me is the fact there exists the 'total debt burden' but there is also its mirror image - debt based money that many others have accumulated. So it is not necessarily the 'total debt burden' but the fact of its asymmetry and the burden on those without.

The housing market is used as a vehicle for lumbering people with massive amounts of debt. This cost is vastly more expensive than anything the bankers can do with their interest, and the economy collapses when demand collapses due to debt saturation.

We've got more money than ever before because there is so much debt. Yet people still cite the 'fact' that we havn't got enough money as the reason for collapse because we cannot meet the spiralling interest payments, without realising that these two points are contradictory.

Edited by chefdave
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Well thats part and parcel of the land market, but we still need access to land and land will always command a market price. What I'm suggesting is that instead of pretending that this price doesn't exist we recognise it and use it to our advantage.

nope.

by default you have access to the entire globe.

Thsi can only be restricted and it can only be recstricted in one of two ways -

1) you agree not to go places

2) you are coerced into not going places

The first is legitmate, the second ain't. That is all.

I'm not giving them absolute power to tax, I'm advocating taxation based on the principles of the free market and limiting their powers at the same time. That means if they get greedy and overtax, they simultaneously destroy the tax base they're working from as they impoverish the economy.

And they care about this because? As everyone else is in shit street, they can just tax more to make up the difference, until full on collapse and/or revolution.

The system will never be perfect, and they'll always be a certain amount of corruption going on whether it be in the public sector or the private. But if there are certain rules we can adopt which will lower the chances of widespread corruption and abuse then I think we should give them a try. If it fails then fair enough, we can try something else. But going from here, to a position where we have no state and no corruption or violence is a little far fetched imo. It would be a bit like abolishing crime by getting rid of all laws, yes technically there would be no crime because we refused to recognise it or do anything about it, but on average peoples would be much worse off.

Ok, heres what I want you to do.

Write down on a piece of paper "I want the land market to be fair and nice."

Let me know the results.

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And they care about this because? As everyone else is in shit street, they can just tax more to make up the difference, until full on collapse and/or revolution.

It would be great if we could just blame this whole thing on a few individuals with personality disorders because we could then get rid of them and live out our lives in peace. But there are plenty of nice well meaning politicians throughout the globe that still inadvertantly advocate bad things because the rules they use ensure that the population aren't treated as equals.

The credit crunch and the predator state are part of a wider structural problem, neither will be solved by praying for collapse and then hoping that people will see sense and decide to just be nice to one another. More likely, we'll end up with something very similar to what we have now but just a little more unstable, even more corrupt and with more poverty.

Edited by chefdave
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It would be great if we could just blame this whole thing on a few individuals with personality disorders because we could then get rid of them and then all live out our lives in peace. But there are plenty of nice well meaning politicians throughout the globe that still inadvertantly advocate bad things because the rules they use ensure that the population aren't treated as equals.

The credit crunch and the predator state are part of a wider structural problem, neither will be solved by praying for collapse and then hoping that people will just be nice to one another. More likely is that we'll end up with something very similar to what we have now, just a little more unstable and with even more poverty.

That's exactly right.

People en masse are ******ed up and think that mad things like a land tax can ever possibly work. When this thing does collapse completely, people will keep trying to rebuild it, no question.

However, on a discussion forum we can go for some actually correct answers, so I do. :)

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Land isn't a market, it's a protection racket - an extortionist ring.

Once you realise that, the problem and the solutions become obvious and they don't include making the extortion official by land taxes!

The same is true of our "debt based" monetary system. There nowt wrong with getting into debt, but the idea that getting into debt creates anything is obvliously incorrect and fraudulent. The idea that coloured paper or PC numbers have incredible value is also complete shit.

But then it's the exact same thing as the land issue - an extortionists ring, a protection racket.

If we have to live with a government and taxes though, LVT seems a far better tax than many others and cuts down on rent seekers. Imagine if we cut NI and corporation tax, for instance and levied the same money via LVT - people could afford houses and we would attract businesses.

As for fiat, if we had fewer taxes, the bondage by government would be much less tight. People could then be free to keep their wealth in whatever form of "money" they wished (whether PMs, equities, fiat or whatever). As long as we aren't taxed to death, I don't think fiat is inherently any more evil than the state itself. I know your core anarchist views aren't compatible with this, but if we have a state and taxes...

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That's exactly right.

People en masse are ******ed up and think that mad things like a land tax can ever possibly work. When this thing does collapse completely, people will keep trying to rebuild it, no question.

However, on a discussion forum we can go for some actually correct answers, so I do. :)

Well I guess you have two choices then;

1) Try and change everyone's personality, or

2) Try and change the rules of the game so that we didn't treat each other as slaves.

Although they're both unlikely I would say option 2 would be easier and preferable to option 1.

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Well I guess you have two choices then;

1) Try and change everyone's personality, or

2) Try and change the rules of the game so that we didn't treat each other as slaves.

Although they're both unlikely I would say option 2 would be easier and preferable to option 1.

Only 1 works.

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I had a conversation with a Natwest bank manager recently:

Me: is it true that when the bank agrees to 'lend' someone a loan or mortgage that the bank just creates the money out of thin air and that the only thing of value in the transaction is the person's signature/promise and the security?

Natwest Bank Manager: That's nonsense, we have to raise the money on the international monetary markets.. We are regulated by the FSA you know..

Me: So why does Natwest call itself a 'bank'?

Bank Manager: What?

Me: Well why do you have to 'raise' the money to lend? If you were a bank surely you would have money to lend?

Natwest Bank Manager: We have money, we lend depositor's money

Me: You just said you get it from the international monetary market

Natwest Bank Manager: Erm

Me: Where does the money on the international monetary market come from?

Natwest Bank Manager: <Can't remember exact answer but it basically translated as 'don't know'.

It just shows the level of obfuscation and compartmentalisation of knowledge going on here. Even a branch bank manager has no idea about money. I believe even MDs of the entire bank chain are really only the level of sheep dogs.

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I had a conversation with a Natwest bank manager recently:

Me: is it true that when the bank agrees to 'lend' someone a loan or mortgage that the bank just creates the money out of thin air and that the only thing of value in the transaction is the person's signature/promise and the security?

Natwest Bank Manager: That's nonsense, we have to raise the money on the international monetary markets.. We are regulated by the FSA you know..

Me: So why does Natwest call itself a 'bank'?

Bank Manager: What?

Me: Well why do you have to 'raise' the money to lend? If you were a bank surely you would have money to lend?

Natwest Bank Manager: We have money, we lend depositor's money

Me: You just said you get it from the international monetary market

Natwest Bank Manager: Erm

Me: Where does the money on the international monetary market come from?

Natwest Bank Manager: <Can't remember exact answer but it basically translated as 'don't know'.

It just shows the level of obfuscation and compartmentalisation of knowledge going on here. Even a branch bank manager has no idea about money. I believe even MDs of the entire bank chain are really only the level of sheep dogs.

Thats unfair. You can't start throwing facts and a bit of critical thinking at the sheeple, you leave them utterly defenseless.

Leave them alone you bully!

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And land cannot be owned because it has not been created, by hand... Fine but what's to stop someone sleeping in your house if you don't want them, do you reject any arguments from utility?

Presumably you make some windows, doors and locks to make entry impossible without damage to your property (hand made windows and doors)?

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