Where has all the money in the world gone?
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Re: Where has all the money in the world gone?
#2The fundamental problem is that the monetary systems of the modern world are all designed on the Wile E. Coyote principle. As long as you never look down, the system works.
In the U.S. there is ~$14 trillion in government debt. There exists tens of trillion more in private debt. But only $2 trillion exists in bonafide, actual, real honest-to-goodness dollars (I'm including in that count accounts at the federal reserve, not just paper money).
How is this system sustainable? How can any of this debt ever be repaid? Well, since everyone knows the government can print money, most people do not worry about the government being insolvent. A dollar T-Bill is as good as a dollar green bill, both are backed by the full faith and credit of the USG. If the government needs to, it can always print money to redeem mature treasury debt. Since no one worries about insolvency, most people would rather have treasury bills (or a deposit account or CD backed by TBills) because they pay interest. So the $14 trillion rolls over in perpetuity. In reality, $14 trillion is not really debt, since it is nonsensical to speak of debt that one owes oneself and can negate by printing paper. The $14 trillion is the money supply - T-Bills are just a dividend paying form of money.
However, the situation in Europe is much more sticky. Europe runs the same type of monetary system. There are tens of trillions in Euro denominated debt, but only $1.3 trillion in actual bonafide Euros. However - unlike with the dollar - the countries that created this debt do not have the power to create Euros. So as suddenly as markets lose confidence in the debt, it becomes impossible to roll over the debt and pay it off. There simply are not enough Euros in the world to pay off even a small amount of debt. Every single country in Europe would be insolvent if investors look down and lose confidence. Even Germany could not pay its debt if investors demanded redemption at maturity The European Union government could order the european central bank to print money to buy out the debt, but this creates all sorts of political conflict as it results in transferring real wealth from country A to country B.
So that's why Europe is stuck. It adopted a monetary system that works when the government controls the currency, and adopted it in a situation where governments cannot print money. No one in Europe has the brains or authority to actually refactor and re-architect the system, so they are just muddling around, following the path of least resistance and putting in stop-gap measures.
My own pet solution is on my blog: http://intellectual-detox.com/europes-crisis/ If anybody from the ECB reads Hacker News, I am available for hire as a consultant at the low, low fee of 1 ounce of gold an hour :-)
Re: Where has all the money in the world gone?
#3Watch Zeitgeist Moving Forward and you'd understand.
Re: Where has all the money in the world gone?
#4When 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 perpetuating a perverted economic system.
Re: Where has all the money in the world gone?
#5Watch Zeitgeist Moving Forward and you'd understand.
The government can not print money, every dollar printed has to be borrowed into existence via debt. If the government could print, then there'd be no need for tax. Watch the Moving forward movie for more revelations.
Re: Where has all the money in the world gone?
#6When 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…
Huh?
I've learned a bit about money, and this comment strikes me as conspiracy theory having nothing to do with "how money really works".
Re: Where has all the money in the world gone?
#7Corral everyone into centralized monetary dictatorships, and this is what happens. What did you expect?
It doesn't matter how you design the monetary system, what matters is that it's centralized -- a mandated system backed by SWAT teams. Create that, and you've just created a system that will inevitably result in sweeping financial destruction throughout the economy.
What we need is the diversification a free market money system would provide.
Re: Where has all the money in the world gone?
#8The fundamental problem is that the monetary systems of the modern world are all designed on the Wile E. Coyote principle. As long as you never look down, the system works. In the U.S. there is ~$14 trillion in government debt. There exists tens of trillion more in private debt. But only $2 trillion exists in bonafide, actual, real honest-to-goodness dollars (I'm including in that count accounts at the federal reserv…
I thought US debt was backed by the military? The debt represents faith in the United States and the world-system as a whole.
I think the only way this could collapse Wile E. Coyote style was if the trade routes in the Atlantic and the Pacific developed a huge problem with highwaymen and the US military couldn't lock it down.
Re: Where has all the money in the world gone?
#9The fundamental problem is that the monetary systems of the modern world are all designed on the Wile E. Coyote principle. As long as you never look down, the system works. In the U.S. there is ~$14 trillion in government debt. There exists tens of trillion more in private debt. But only $2 trillion exists in bonafide, actual, real honest-to-goodness dollars (I'm including in that count accounts at the federal reserv…
You ask how any of this debt can ever be repaid. But is this really what we want to achieve? Repay the debt? If money is, like in the reddit post, an IOU (or a certain unit of debt), then the idea is to balance out the amount of money (debt) with the growth of the economy. Too much and we got inflation. Too little and we cripple the economy.
I'm very curious why debt should be repaid at all, care to explain?
(Note: I think one's own debt is different than the debt in an economic scale)
Re: Where has all the money in the world gone?
#10The fundamental problem is that the monetary systems of the modern world are all designed on the Wile E. Coyote principle. As long as you never look down, the system works. In the U.S. there is ~$14 trillion in government debt. There exists tens of trillion more in private debt. But only $2 trillion exists in bonafide, actual, real honest-to-goodness dollars (I'm including in that count accounts at the federal reserv…
As long as you never look down, the system works.
Perhaps to nitpick - as long as enough people don't believe their neighbors believe that their neighbors are looking down, things are fine. If I personally look down, it is doesn't matter.