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Debt Based Monetary System Question


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Doesn't matter.

it does if you are waving weapons in my face based on their being a relationship.

Do you accept that reasoning about the whole set of similar connections is a useful activity, if for example you wanted to intuit something about Mr Z's likely future behavior or about group A-Y's likely future behavior?

You can do what you like. Makes no nevermind to me. Just put the guns down, eh?

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yes but if that reality includes the brain, which is creating the beliefs in question then there is no possibility of being 'grounded' in reality.

There is no possibility of being grounded anywhere else.

mistakes can and are made tho. hence the chat.

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it does if you are waving weapons in my face based on their being a relationship.

You can do what you like. Makes no nevermind to me. Just put the guns down, eh?

Ok. Since it is very rare the "evil" men (as you said earlier this is a useful label) will put their guns down the correct course of action for the "good" guy is to submit to the evil guys. right?

Mansoor

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Ok. Since it is very rare the "evil" men (as you said earlier this is a useful label) will put their guns down the correct course of action for the "good" guy is to submit to the evil guys. right?

Mansoor

That would depend on what the good guy wanted to do, how practicable it was to fight back and so forth. nothing wrong with self defence.

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But you have said earlier:

"Sure, except you can't fight violence with violence and have less violence."

Can you please reconcile these two statements?

Mansoor

Violence - initiating an attack on someone else.

Defence - using force to stop such an attack.

However, notice you do indeed increase the level of violence if you fight back.

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Violence - initiating an attack on someone else.

Defence - using force to stop such an attack.

However, notice you do indeed increase the level of violence if you fight back.

And since there are no collectives. The above should only be performed at the level of the individual. right? The defense part at least. right? I should not attempt to persuade you and to help me defeat the bad guy. right?

Mansoor

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And since there are no collectives. The above should only be performed at the level of the individual. right? The defense part at least. right? I should not attempt to persuade you and to help me defeat the bad guy. right?

Mansoor

You can't without getting the second guy to initiate an attack, which will increase the amount of violence even further.

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You can't without getting the second guy to initiate an attack, which will increase the amount of violence even further.

But according to your earlier pronouncement about individual self defense will also increase the level of violence. But for some reason in your mind that may be ok. But signing up someone else to help you is not ok.

Can you please reconcile?

Mansoor

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But according to your earlier pronouncement about individual self defense will also increase the level of violence. But for some reason in your mind that may be ok. But signing up someone else to help you is not ok.

Can you please reconcile?

Mansoor

I didn;'t make any moral case either way.

I just described factually what's occuring.

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I didn;'t make any moral case either way.

I just described factually what's occuring.

But we have already agreed on the standard (the rule) for good and bad (truth and opposite of it.. remember).

Why don't you go ahead and please apply the standard? And tell me if asking the guy next to you to help fend off the bully is a good thing?

Mansoor

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But we have already agreed on the standard (the rule) for good and bad (truth and opposite of it.. remember).

We agreed the standard, but disagreed on the methodology.

Why don't you go ahead and please apply the standard? And tell me if asking the guy next to you to help fend off the bully is a good thing?

Mansoor

It's a bad thing, defeats it's own logic.

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You mean because it leads to more violence if I get help to fend off a bully.

Well it does that, so if your aim was to reduce the amount of violence you failed.

However, in this case you are both saying that attacking others is wrong and asking for someone to attack another. So just logically, it doesn't work.

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Well it does that, so if your aim was to reduce the amount of violence you failed.

However, in this case you are both saying that attacking others is wrong and asking for someone to attack another. So just logically, it doesn't work.

So I can be absolutely clear about your position. Consider the following scenario:

1. A bad evil dude (a useful label) is attempting to rape my wife in my home (he has broken in lets say).

2. I am too weak physically to stop him.

3. My brother who lives next door is a very strong guy.

So, Is it WRONG for me to quickly run to his house and beg him to help my wife!

Mansoor

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So I can be absolutely clear about your position. Consider the following scenario:

1. A bad evil dude (a useful label) is attempting to rape my wife in my home (he has broken in lets say).

2. I am too weak physically to stop him.

3. My brother who lives next door is a very strong guy.

So, Is it WRONG for me to quickly run to his house and beg him to help my wife!

Mansoor

Not at all.

but you aren't asking him to attack anyone.

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Help is going to in the form of attack on the rapist. Is it not? While the rapist is enjoying himself my brother is going to punch him. right?

Mansoor

Nope. You asked him to stop the rape, not hit anyone.

As he's very, very strong he won't have to swing them fists.

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For someone who has been on this forum as long as I have, my understanding of the monetary system is pretty poor. As a result, I've buried this thread down in the Economics forum in the hope that I can get some sensible and non abusive feedback to an idea that I have been formulating over the past couple of days. So I'd really appreciate any constructive feedback to what I'm posting, even though it may be obvious / wrong / plain stupid to other posters.

Right, that out of the way, discuss...

The problem with a debt based monetary system is that we have an ever growing supply of money which is all chasing a return. The return can only be gained in a debt based system by lending that money out, whether you are a bank lending mortgages, or a saver depositing cash in a building society. So I start with £10. I lend it out, and I get £11 back, so I now have 10% more money chasing a return, which means I have to find someone to borrow my £11. That figure grows with every turn of the cycle. [1]

The problem with this is that there is a finite supply of people who are good prospects to lend to. Once every "good" borrower has taken on as much debt as they can manage, I need to find some other way of generating returns [2]. So one way to do this is to relax my lending criteria, and accept slightly "less good" prospects. But that obviously brings the risk of defaults, which is not something I want to get involved in.

So the solution is to lend into a specific asset class, thereby driving up the price of that asset class, and this will help to minimise defaults. As long as I throw enough credit at it, that asset class will keep on inflating. So even if some of my borrowers struggle to pay the debt, they (or I, if I take possession of it) can sell that asset for more than they owe me, and I have still made a return.

And this works up to the point where I have saturated even the poorest borrowers. At that point, enough of them are underwater that the resulting fire sales start to hit the value of the asset class, and then I'm in real trouble. [3]

That's enough for now - some questions in footnotes:

[1] "That figure grows with every turn of the cycle". The increase in the money supply since WW2 has been exponential, and I often see this linked to the dropping of the gold standard. How would staying on the gold standard prevent this exponential growth?

[2] "I need to find some other way of generating returns". In a normal (ie non credit bubble) cycle, I've run out of good borrowers to lend to, and I'm not prepared to relax my lending criteria. What happens to the money supply while I wait for the good borrowers to deleverage to the point that they are prepared to take on more debt? Does it stop growing? Contract?

[3] "And then I'm in real trouble". In a normal cycle, I guess we'd expect massive destruction of (my) wealth - and I get just what was coming to me because I lent to bad prospects. We haven't seen this yet (or is it still to come?), but will we?

Thanks for any comments on this, and apologies for a bit of a scatterbrained post. But I really want to develop this in idiot speak that I can understand. I guess some points that I'm thinking at this early stage are:

1. The financial crisis is not the fault of all the bad borrowers who never had a hope in hell of paying the money back, or of the bankers lending recklessly - it's the fault of the system (all of us) and our perceived "right" to see a return on our cash.

2. Whether it happens this time around, next time, or the time after that, the existing monetary system is doomed. As long as the monetary base keeps growing, there is no option but to lend to default risks.

3. I'm beginning to see the housing bubble as a sort of double ended ponzi scheme - the borrowers at one end and the "investors" at the other. Each end was only sustainable while you had enough people either borrowing the money, or investing enough (in MBS etc) to ensure that the level of credit meant that the asset class kept rising.

4. How does this affect my position - I'm deliberately not revealing that because this isn't a post about how I should structure my investments. I want to expand my ideas and understanding first.

Right, time to get a scotch - do your worst

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.

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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.

Yesm, and that's where the fraud occurs.

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.

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Nope. You asked him to stop the rape, not hit anyone.

As he's very, very strong he won't have to swing them fists.

Two points:

1. Now change the scenario. A gang rape is going on on my wife. And next door is my brother and his sons live there. So it is wrong for me to ask my brother and his sons to stop the raping gang?

Mansoor

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Two points:

1. Now change the scenario. A gang rape is going on on my wife. And next door is my brother and his sons live there. So it is wrong for me to ask my brother and his sons to stop the raping gang?

Mansoor

14 points

1. this is one point, not two

2. As long as they aren't attacking anyone, no worries.

3. I'm lying about there being another 11 points

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