It is mathematically impossible for all of the debt in the world to be repaid (without more debt, and it's this way by design).
Money is debt, and debt is slavery. Shhh! You're not supposed to look behind the curtain.
Where has all the money in the world gone?
131–140 of 188 posts
Re: Where has all the money in the world gone?
#132Earlier quoted context omitted.
It goes beyond that. Think about how very tenuous ordinary civilization is. Think about what would happen if you suddenly turned into a psychopath. How easy it would be to kill so many people around you. Jam a pen in someone's neck and they're dead. How easy would it be for the guy standing behind you in line to take your life? And that applies to everyone around you all the time. Every second of every day we are put…
It's twisted but I always wonder the same thing. Why don't psychopaths "get" more people? If someone rings my doorbell I answer the door, I expect the person on the other side to be a rational human being. It wouldn't be too hard for the other person to just bum-rush me with a knife and take me out. I think there may be an evolutionary factor involved, easier to survive in a group so there is an incentive not to harm…
Google 'Monster of the Andes'
Re: Where has all the money in the world gone?
#133Earlier quoted context omitted.
Well said. I can't but wonder how the system evolved: The workers build, the scientists study & discover, the engineers design and improve, and everything they produce is sold for X amount of money while they are being paid Y amount of money. X - Y = P (profit) which goes to the capital owners who can spend it on the goods produced by the others without much participation at the production effort. Also I find it amaz…
The fruits of the labors of past generations are being filtered into 3 areas - the lowest common wage earner in the world that can do the grunt work the cheapest (Chinese, or Illegals, etc) the wealthy, who control all investment and funding, and governments that can freely tax and deficit all they want. We don't "need" to work more. The USA produces a substantial excess of food, even past the excessive eating habits…
One doesn't have to buy into the system you describe. I basically sleep on the beach on Maui and mostly eat for free. In many ways, it's a good life :)
Re: Where has all the money in the world gone?
#134The so-called “fiat money” (i.e., money not backed by a commodity) used by modern economies is controlled by a central bank whose overriding goal is maintaining monetary and financial stability. Only the central bank can issue new money or take it out of circulation.
Note that this is just a political arrangement that prevents the parts of a government that spend money from conjuring it out of thin air. For example, in the U.S., President Obama can’t just call Ben Bernanke and demand that the Federal Reserve issue more money to pay for the federal government’s expenditures; instead, the federal government must either collect additional taxes or borrow funds from investors, and the Federal Reserve independently gets to decide if, how, and when to issue new money (or take it out of circulation) to fulfill its dual objectives of monetary and financial stability.
Typically, central banks like the Federal Reserve issue money (or take it out of circulation) via two mechanisms:
(1) The central bank can buy and sell government bonds to expand or contract the amount of money in circulation and/or push interest rates up or down. When a central bank buys such bonds, it pays with newly issued money, thereby replacing one government obligation (bonds) with another (money) of equal present value; and when the central bank sells any government bonds it holds, the money it receives is taken out of circulation (i.e., destroyed).
(2) Certain private-sector financial firms can borrow directly from the central bank, which lends them newly issued money, thus acquiring a new financial instrument (a loan to a private-sector entity) and issuing a new obligation (money) of equal magnitude; when the loan is repaid, the central bank takes the money out of circulation, reducing government claims and obligations by the same magnitude.
The money issued by a central bank, which is held only by depositary institutions like banks, is called “reserves.” The aggregate of all bank reserves (plus all paper currency in circulation, to be precise) is called the “monetary base.”
In normal times, whenever bank reserves grow beyond required legal minimums, banks supposedly make more loans, thereby increasing the amount of money flowing through the economy and promoting economic growth. In other words, an increase in the monetary base is supposed to result in an increase in the money supply.
However, at present, for whatever reasons (and there is much debate among professional economists as to what those reasons might be), the monetary base has grown immensely[1], but banks are not making the expected additional loans, so the amount of money flowing through the economy is not growing as economists would expect in normal times.[2] “Money velocity” (a measure of the number of times money gets turned over in the economy) has collapsed.[3]
So, that’s the answer to the question, “where has all the money gone?”
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[1] You can see the incredible growth in the U.S. monetary base here: http://research.stlouisfed.org/fred2/series/BASE/
[2] You can see the incredible growth in excess reserves in the U.S. banking system here: http://research.stlouisfed.org/fred2/series/EXCRESNS?cid=123
[3] You can see the dramatic drop in U.S. money velocity here: http://research.stlouisfed.org/fred2/series/M2V?cid=32242
Re: Where has all the money in the world gone?
#135The so-called “fiat money” (i.e., money not backed by a commodity) used by modern economies is controlled by a central bank whose overriding goal is maintaining monetary and financial stability. Only the central bank can issue new money or take it out of circulation. Note that this is just a political arrangement that prevents the parts of a government that spend money from conjuring it out of thin air. For example,…
And you can read a fairly technical description (written in 1999) of the current situation here:
Thinking about the liquidity trap: http://web.mit.edu/krugman/www/trioshrt.html
Re: Where has all the money in the world gone?
#136Earlier quoted context omitted.
The problem isn't socialism, it's a divergence of productivity between the northern and southern regions of the euro area. When you combine this with a shared currency you're asking for trouble. Note that the socialist nordic countries have stellar economies. I've noticed a lot of Americans blame the euro crisis on socialism which,is interesting since it doesn't seem to hold up to scrutiny. I'd be interested in heari…
People use the word Socialism when they mean something like "perversion of incentives". We perceive that Socialism incentivizes bad choices, like having more children than you could afford without government benefits, or making investments that appear less risky because you assume a government bailout will protect you. As you point out, the nordic countries show that perverse incentives don't necessarily follow from…
Of course less socialism also leads to perverse incentives at times, like avoiding starting a company because of fear of not being able to get health insurance.
Re: Where has all the money in the world gone?
#137Earlier quoted context omitted.
You have to explain why printing a lot of money would cause inflation in the first place. What GP is saying is that if the owners of treasuries were unhappy with those treasuries and preferred holding on to cash, the government could just create that cash and nothing would change. This would not change prices, since if the owners of treasuries just swapped those treasuries for cash, businesses would not see their dem…
What do you mean nothing would change? If the Federal Reserve all of the sudden prints 10% of the dollars in existence to pay the US's debt, won't that devalue everyone else's salaries and such by around 10%?
You've perhaps heard the term "quantitative easing" thrown around in the news media lately?
QE is the Fed printing money; lots and lots of money. Around 2 trillion so far. And very little has changed.
Re: Where has all the money in the world gone?
#138The so-called “fiat money” (i.e., money not backed by a commodity) used by modern economies is controlled by a central bank whose overriding goal is maintaining monetary and financial stability. Only the central bank can issue new money or take it out of circulation. Note that this is just a political arrangement that prevents the parts of a government that spend money from conjuring it out of thin air. For example,…
And you can read a fairly technical description (written in 1999) of the current situation here: Thinking about the liquidity trap: http://web.mit.edu/krugman/www/trioshrt.html
Yup.
The source material on liquidity traps (written in 1936): http://ebooks.adelaide.edu.au/k/keynes/john_maynard/k44g/
An alternative explanation on why they happen (written in 1933) here: http://fraser.stlouisfed.org/docs/meltzer/fisdeb33.pdf
And yet another alternative explanation here: http://www.levyinstitute.org/pubs/wp74.pdf
All three explanations written by people who lived through the Great Depression of the 1930's. All three worth reading IMO.
Re: Where has all the money in the world gone?
#139When you learn how money really works, you begin to understand just how diabolical our entire socio-economic system is. Inflation, recessions, boom-bust, the stock market, fractional reserve banking, interest rates... it's all rigged, a giant shell game, and it boils down to an invisible whip that the rich use to keep people working for things they don't really need and to pay taxes for the sole purpose of perpetuati…
It goes beyond that. Think about how very tenuous ordinary civilization is. Think about what would happen if you suddenly turned into a psychopath. How easy it would be to kill so many people around you. Jam a pen in someone's neck and they're dead. How easy would it be for the guy standing behind you in line to take your life? And that applies to everyone around you all the time. Every second of every day we are put…
I think it was on RadioLab where a primatologist mentioned how amazing an airplane flight is. Not the aerodynamics, but that hundreds of people sit jam-packed for hours and no one gets hurt. If you put that many monkeys or baboons or whatever in a giant metal tube for a few hours, it would be a bloodbath.
Re: Where has all the money in the world gone?
#140I just finished David Graeber's "Debt", and it really enlightened me on this subject more than anything in that reddit thread. It's one of the most scholarly, informative, provocative books I've read in a very long time. I'm actually reading it a second time through, just to make sure I understand it all.
I've been reading large chunks of that and it's both good and bad. The good parts are where he sticks to his core strength of anthropology -- it's filled with fascinating descriptions of how commerce and law worked in various societies, ancient and modern, from the Irish monks who sat down and figured out the precise compensation that you need to pay if one of your bee stings another man [the regular price of the sti…
The point that the morality of debt is based on the fact that it's a promise already appears on page 4. Similarly the very last paragraph, begins "What is a debt, anyway? A debt is just the perversion of a promise. It is a promise corrupted by both math and violence..."
And so on. Might want to read more than "chunks" of a book before lecturing the world on what's not in it.