Economic Devastation

[STT]

Perhaps not a good example, but don't Islamic banks run on a non-fractional system?

Anyway, again I disagree with you- credit and loans have always existed (at least where allowed and not held back by religious dogma) Credit is part of the free market. It just needs to be divorced from parasitical fascist entities like the state and corporations.

I have no idea how they work.

I am pro credit, dont get me wrong, but only credit from capital.

But i`m anti printed money credit, which is an euphemism of population robbery. Because you steal from the population via inflation , and then loan that back at an interest to them, its an obvious theft.

Yes thats correct some middle east related banks work around credit and interest by guaranteeing to buy back your holding of Palladium for example at a higher worth then you deposited it with them.   I guess that works though Palladium is related to car exhausts and so subject to industrial demand and speculation, Im sure the price can fall but maybe its assumed over long term its a superior form of asset holding.  Certainly vs sub prime debt as tier 1 core holding the banks failed spectacularly in comparsion and I think alot of Asian banks also did well to opt out of this Washington DC influenced thinking - sub prime was of course largely subject to USA politics and government schemes even while traded abroad


Credit from capital works by default when any bank has fractional reserves.    Its a form of monetary creation in an economy (also destruction with default and bankruptcy so I guess this is the key to its balance?).   I agree its far beyond that when the central bank just 'invents' money based on their relationship to government and sole licensing of national currency.  In that case it seems like fraud, a failure to account properly but it works if nobody calls back their capital I guess; any gap can be met with leverage

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[sidhujag]

Debt is destroyed when real work is translated into payment of that debt, the problem is that debt is being created faster than real work is being done, it only will work if work atleast equals creation of debt, as anything else is not sustainable.

[rpietila]

Debt is destroyed when real work is translated into payment of that debt, the problem is that debt is being created faster than real work is being done, it only will work if work atleast equals creation of debt, as anything else is not sustainable.

I wish it were so, but no! The amount of work done does not do anything to extinguish debt! Debt (in a fiat economy) is a mathematical construction that is unsustainable because the amount of work done, does not add the medium of extinguishing debt to the economy. In fact nothing adds to the medium, in an even bigger fact such a medium does not even exist! 

In a resource-based economy with for instance gold as the accepted payment medium, work could add to the quantity of gold in existence, so there was some connect between debt and real world.

In practice debt is always unsustainable, the main mechanism being that the most productive members don't use it, for which reason others are lured to thinking they can service the debt as they don't understand their productivity is not high enough. Debt is also a main tool for enslavement and control in many levels (personal, government, everything in between).

[makeacake]

Debt is destroyed when real work is translated into payment of that debt, the problem is that debt is being created faster than real work is being done, it only will work if work atleast equals creation of debt, as anything else is not sustainable.

I wish it were so, but no! The amount of work done does not do anything to extinguish debt!

Fun facts:
1. Debt kills more people each year than ISIS, cancer, and the so-called ''natural causes" combined.
2. Fiat money is debt. Debt (fiat "money") is printed out of thin air.

[macsga]

Debt is destroyed when real work is translated into payment of that debt, the problem is that debt is being created faster than real work is being done, it only will work if work atleast equals creation of debt, as anything else is not sustainable.

I wish it were so, but no! The amount of work done does not do anything to extinguish debt!

Fun facts:
1. Debt kills more people each year than ISIS, cancer, and the so-called ''natural causes" combined.
2. Fiat money is debt. Debt (fiat "money") is printed out of thin air.

(2):




PS: Soon...

[TPTB_need_war]

Banks will always issue credit in one form or another as there will be a market for it.

Imagine we've entered the Knowledge Age and the rate of innovation is so exponentially more rapid due to freeing up the individual creativity (as I have explained exhaustively in the Economic Devastation thread due to the shift from fixed capital investment for economies-of-scale in physical manufacturing to empowerment of the individual, e.g. localized manufacturing with 3D printers or programming as a vocation, etc.), meaning that the stored money is worth much less in terms of opportunity cost (yet while still gaining purchasing power assuming debasement rate is small, 0, or negative[1]) thus if banks can't charge very high interest rates then their share of the economy is mathematically always shrinking. Yet if they charge very high interest rates, eventually no one can pay them because the money supply isn't expanded compounded at that rate.

So the only mathematical way for banks to remain viable in the Knowledge Age that I envision is taking form now, is for banks to issue their own debased unit of currency and charge very high interest rates. But they can't do this and have it denominated in a crypto-coin unit they don't control the debasement of, without going bankrupt during busts (bank runs), because their central bank can't print money to bail them out.

Therefor, banks must be able to control the money supply in the Knowledge Age else they are going extinct.

The Industrial Age system is reverting to totalitarianism trying to avoid its inevitable extinction. Find a way to stand clear of the scorched earth the old will burn down with it as it goes away. Unfortunately the common poeple are caught up in the old and even cheering it on similar to the Luddites (e.g. those who think Big T is not a false flag and who want to hang on to their Babylon creations such as the "EU to end all wars"). Hopefully someone will find a way to get crypto-currency working in micro-transactions to billions of users pronto, so the Industrial Age will just crumble away like the Berlin wall.


[1] Negative debasement is very likely with crypto-currencies such as Bitcoin which target a constant money supply since users lose their passwords and there is no way for the system to know this (unless coins are forfeited if not spent or if instead the money supply is kept constant relative to money velocity and in the latter case you wouldn't need to reward the debasement to miners necessary and could instead pay it to every coin address in the UTXO).

[Wekkel]

[...]Big T[...]

What is that?

[RealBitcoin]

Hopefully someone will find a way to get crypto-currency working in micro-transactions to billions of users pronto, so the Industrial Age will just crumble away like the Berlin wall.

21 inc microchips into smartphones, ultra marketing advantage for mobile phone companies, they will adopt it fast.

Then mainstream people will mine bitcoins on their phones, not much a few satoshis maybe, however this increases demand for bitcoin because it exposes it's rarity to the mainstream.

Then price will skyrocket, 100-1000 satsohis that were minable by mainstream people will quickly be worth a fully time salary.

Then bitcoin becomes the de facto global reserve currency.

[sidhujag]

Debt is destroyed when real work is translated into payment of that debt, the problem is that debt is being created faster than real work is being done, it only will work if work atleast equals creation of debt, as anything else is not sustainable.

I wish it were so, but no! The amount of work done does not do anything to extinguish debt! Debt (in a fiat economy) is a mathematical construction that is unsustainable because the amount of work done, does not add the medium of extinguishing debt to the economy. In fact nothing adds to the medium, in an even bigger fact such a medium does not even exist!  

In a resource-based economy with for instance gold as the accepted payment medium, work could add to the quantity of gold in existence, so there was some connect between debt and real world.

In practice debt is always unsustainable, the main mechanism being that the most productive members don't use it, for which reason others are lured to thinking they can service the debt as they don't understand their productivity is not high enough. Debt is also a main tool for enslavement and control in many levels (personal, government, everything in between).

What happens when you service your mortgage through payments? Your saying that its not paying anything off at all? Are you not removing money from circulation?

[RealBitcoin]

What happens when you service your mortgage through payments? Your saying that its not paying anything off at all? Are you not removing money from circulation?

Not really because that money is loaned out again and the ponzi scheme grows, because each loan payment multiplies the amount loaned out again by x10 in a 10% reserve system, or even more in western countries where they usuall have lower than 5%.

[bigtimespaghetti]

Banks will always issue credit in one form or another as there will be a market for it.

Imagine we've entered the Knowledge Age and the rate of innovation is so exponentially more rapid due to freeing up the individual creativity (as I have explained exhaustively in the Economic Devastation thread due to the shift from fixed capital investment for economies-of-scale in physical manufacturing to empowerment of the individual, e.g. localized manufacturing with 3D printers or programming as a vocation, etc.), meaning that the stored money is worth much less in terms of opportunity cost (yet while still gaining purchasing power assuming debasement rate is small, 0, or negative[1]) thus if banks can't charge very high interest rates then their share of the economy is mathematically always shrinking. Yet if they charge very high interest rates, eventually no one can pay them because the money supply isn't expanded compounded at that rate.

So the only mathematical way for banks to remain viable in the Knowledge Age that I envision is taking form now, is for banks to issue their own debased unit of currency and charge very high interest rates. But they can't do this and have it denominated in a crypto-coin unit they don't control the debasement of, without going bankrupt during busts (bank runs), because their central bank can't print money to bail them out.

Therefor, banks must be able to control the money supply in the Knowledge Age else they are going extinct.

The Industrial Age system is reverting to totalitarianism trying to avoid its inevitable extinction. Find a way to stand clear of the scorched earth the old will burn down with it as it goes away. Unfortunately the common poeple are caught up in the old and even cheering it on similar to the Luddites (e.g. those who think Big T is not a false flag and who want to hang on to their Babylon creations such as the "EU to end all wars"). Hopefully someone will find a way to get crypto-currency working in micro-transactions to billions of users pronto, so the Industrial Age will just crumble away like the Berlin wall.


[1] Negative debasement is very likely with crypto-currencies such as Bitcoin which target a constant money supply since users lose their passwords and there is no way for the system to know this (unless coins are forfeited if not spent or if instead the money supply is kept constant relative to money velocity and in the latter case you wouldn't need to reward the debasement to miners necessary and could instead pay it to every coin address in the UTXO).

Interesting, something to think on. Thanks.

[sidhujag]

What happens when you service your mortgage through payments? Your saying that its not paying anything off at all? Are you not removing money from circulation?

Not really because that money is loaned out again and the ponzi scheme grows, because each loan payment multiplies the amount loaned out again by x10 in a 10% reserve system, or even more in western countries where they usuall have lower than 5%.

Dont think you answered the question, please reread and answer carefully. Read my post earlier to understand context because it still applies.

Fact: paying a loan removes money from circulation. Thats common sense.

Fact: a new loan entitles the certified borrower of a state to further leverage that loan with a new one to a certain percentage. This is based on the fact that not everyone will go bankrupt or claim their stake all at once.

Fact: payment of all loans does not equal leverage of new loan entitlements, resulting in a net debt service environment. This is a delicate balance based on supply and demand with interest rates globally. This is why nash said fed controlled rates are the best we got right now until we reach asymptotically ideal money.

[RealBitcoin]

Fact: paying a loan removes money from circulation. Thats common sense.

You are wrong on the first fact.


How is paying a loan remove money from circulation? It creates money not remove it.

BANK  loans 1000$ to Alice from 100$ reserves. 900$ is created out of thin air. If alice defaults on the loan then the money is destroyed since it never materializes it.

If Alice pays it back , then the bank can further loan those out and create again 90% out of thin air (or whatever the reserve rate is). Furthermore now the paid back (printed) money is accounted as the bank's capital + profits, the bank pays taxes on that, and slowly the printed money circulates into the entire economy. And that money is loaned out again and whatever reserve rate.


Your facts are bullshit, no wonder keynesianists ruined the entire world, you don't even understand your own theory

[suda123]

Hopefully someone will find a way to get crypto-currency working in micro-transactions to billions of users pronto, so the Industrial Age will just crumble away like the Berlin wall.

21 inc microchips into smartphones, ultra marketing advantage for mobile phone companies, they will adopt it fast.

Then mainstream people will mine bitcoins on their phones, not much a few satoshis maybe, however this increases demand for bitcoin because it exposes it's rarity to the mainstream.

Then price will skyrocket, 100-1000 satsohis that were minable by mainstream people will quickly be worth a fully time salary.

Then bitcoin becomes the de facto global reserve currency.

Yeap that's the plan I read last week, there are so many business that can benefit off of this technology the Old World Order are not fit to run this new world and the 1% of the 1% know this.

[suda123]

Banks will always issue credit in one form or another as there will be a market for it.

Imagine we've entered the Knowledge Age and the rate of innovation is so exponentially more rapid due to freeing up the individual creativity (as I have explained exhaustively in the Economic Devastation thread due to the shift from fixed capital investment for economies-of-scale in physical manufacturing to empowerment of the individual, e.g. localized manufacturing with 3D printers or programming as a vocation, etc.), meaning that the stored money is worth much less in terms of opportunity cost (yet while still gaining purchasing power assuming debasement rate is small, 0, or negative[1]) thus if banks can't charge very high interest rates then their share of the economy is mathematically always shrinking. Yet if they charge very high interest rates, eventually no one can pay them because the money supply isn't expanded compounded at that rate.

So the only mathematical way for banks to remain viable in the Knowledge Age that I envision is taking form now, is for banks to issue their own debased unit of currency and charge very high interest rates. But they can't do this and have it denominated in a crypto-coin unit they don't control the debasement of, without going bankrupt during busts (bank runs), because their central bank can't print money to bail them out.

Therefor, banks must be able to control the money supply in the Knowledge Age else they are going extinct.

The Industrial Age system is reverting to totalitarianism trying to avoid its inevitable extinction. Find a way to stand clear of the scorched earth the old will burn down with it as it goes away. Unfortunately the common poeple are caught up in the old and even cheering it on similar to the Luddites (e.g. those who think Big T is not a false flag and who want to hang on to their Babylon creations such as the "EU to end all wars"). Hopefully someone will find a way to get cryptocurrency working in micro-transactions to billions of users pronto, so the Industrial Age will just crumble away like the Berlin wall.


[1] Negative debasement is very likely with crypto-currencies such as Bitcoin which target a constant money supply since users lose their passwords and there is no way for the system to know this (unless coins are forfeited if not spent or if instead the money supply is kept constant relative to money velocity and in the latter case you wouldn't need to reward the debasement to miners necessary and could instead pay it to every coin address in the UTXO).

It doesn't matter what they do we grew up in a totally different world from which they came there chances of accomplishing this is less then 0.0001% if you see the grand scheme of it. Since most of there schemes are from corruption most of the establishments they made are affiliated with the innovations coming out so there fucked.

[sidhujag]

Fact: paying a loan removes money from circulation. Thats common sense.

You are wrong on the first fact.


How is paying a loan remove money from circulation? It creates money not remove it.

BANK  loans 1000$ to Alice from 100$ reserves. 900$ is created out of thin air. If alice defaults on the loan then the money is destroyed since it never materializes it.

If Alice pays it back , then the bank can further loan those out and create again 90% out of thin air (or whatever the reserve rate is). Furthermore now the paid back (printed) money is accounted as the bank's capital + profits, the bank pays taxes on that, and slowly the printed money circulates into the entire economy. And that money is loaned out again and whatever reserve rate.


Your facts are bullshit, no wonder keynesianists ruined the entire world, you don't even understand your own theory

You are wrong my first fact is indeed correct.

Any proof of your wild claims or just magic internet knowledge? Depositing money and paying back debt are different things and classified under different regulations. Paying back a loan is called deleveraging on a system whole.

I dont think you fully understand how money works in todays world. Best for you to step back and reassess your situation here, or read my initial post.

[RealBitcoin]

You are wrong my first fact is indeed correct.

Any proof of your wild claims or just magic internet knowledge? Depositing money and paying back debt are different things and classified under different regulations. Paying back a loan is called deleveraging on a system whole.

I dont think you fully understand how money works in todays world. Best for you to step back and reassess your situation here, or read my initial post.

Empty post, instead of addressing my points you just talk empty things in the air.

Where exactly is my explanation faulty? Do you deny the fact that money is double accounted in the current system? The fact that money is in circulation and everytime a bill hits a bank node it gets multiplied like bacteria when hitting sugar?

Please be more specific or dont post, because saying that I`m wrong without telling where am I wrong is nonsense

[sidhujag]

Debt is destroyed when real work is translated into payment of that debt, the problem is that debt is being created faster than real work is being done, it only will work if work atleast equals creation of debt, as anything else is not sustainable.

This is the original post realbitcoin, maybe you didnt catch the subtlety of what I was saying about the fact that not enough work is being done to account for the extra debt being added back on.

There are two ways to fix the system as is, by exploring new ways to become more efficient when it comes to work output, so that 1 hour of man work equates to more than yesterdays 1 hour of man work, which effectively starts to diminish yesterdays debt to an extent. This means a technological break through of some kind usually and is prbably what those in power are banking on. The other way is to find a closer ideal money candidate which is asymptotically closer to the perfect money, one which ties inflation to a real global metric and not just a resource based token but based on a leading health indicator such as gdp... If btc pow can be considered efficiency in energy output then perhaps it can be used, but bitcoin has a problem in that its inflation tends to 0 regardless of an economic health indicator so its a toss up on if it really is an effective ideal money candidate.

[STT]

Not really, debt is never destroyed, its just passed to another entity, because it can be destroyed as the underlying money reserve is always smaller than the debt.

my understanding is that when I withdraw 100 from the bank with 10% fractional reservers, between us we have created an extra $90 into the economy.   When I put that 100 back into the bank, the inflationary effect is reversed.  My 100 deposited pays back the banks core $10 and that $90 leaves the economy though the bank may release it elsewhere, but for that moment.    Its rare that I can borrow money for no charge but sometimes it happens short term so in theory there is no gain or loss with this.  
  The other option is the bank goes bankrupt, in sum total all that credit is lost from somewhere; bond holders maybe even other account holders.  

In practice debt is always unsustainable, the main mechanism being that the most productive members don't use it, for which reason others are lured to thinking they can service the debt as they don't understand their productivity is not high enough.

Well I think productive business uses debt very well and repays it.   That leverage allows them to grow far quicker then merely waiting for profits, in some cases the business cannot exist at all without the debt as other market parties have too much advantage without scale afforded by debt.      An example maybe would be the setup of Dyson which are no doubt useful unique products which save time and wear in use, they are highly profitable but the inventor could not raise capital or gain backing at least at first.  Its revenue is 1.3bn and profit 300m which I think we can call the correct use of money creation for productivity and society is richer overall for being to do more with less work needed, hence its justifiable growth without just money inflationary
https://en.wikipedia.org/wiki/Dyson_(company)

So Dyson took out 100, profited 120 in his business from larger scale operation of good products.  Paid back 110, kept 10 and hence the economy grew bigger and bank itself can potentially lend 200 instead of 100.   This last part is where we have to be very careful on accounting as that is exponential almost explosive growth in theory.
   The relevance to the OP is correct usage of this money expansion is not being done properly, in banking or government so we have giant explosive potential in money creation used wrongly and its going to damage us and our economies.
 The relevance to bitcoin or gold or alternatives to dollar is they do not allow excessive political bias into money creation, hence we have a productive benefit and we presume these alternative economies will rise greatly as dollar spins its wheels in the mess of previous years

[CoinCube]

What happens when you service your mortgage through payments? Your saying that its not paying anything off at all? Are you not removing money from circulation?
...

Fact: paying a loan removes money from circulation. Thats common sense.

Fact: a new loan entitles the certified borrower of a state to further leverage that loan with a new one to a certain percentage. This is based on the fact that not everyone will go bankrupt or claim their stake all at once.

Fact: payment of all loans does not equal leverage of new loan entitlements, resulting in a net debt service environment. This is a delicate balance based on supply and demand with interest rates globally. This is why nash said fed controlled rates are the best we got right now until we reach asymptotically ideal money.

Sidhujag, I would challenge both your first and third "facts" above as both appear to be false.

1) You state that paying a loan removes money from circulation but while this may have been true under a historical gold standard it is not really true today. Your first "fact" follows from the concept of money multiplier. If bank lending is constrained by reserves then paying down debt would remove some multiple of that debt from circulation unless the paid funds were immediately reissued as new debt. This conceptualization of the money multiplier is an inaccurate model of our current system.

In no way does the aggregate quantity of reserves directly constrain the amount of bank lending or deposit creation.

The reality is that under the modern system the amount of bank reserves do not constrain lending. Paying down debt does not lead to a sustained decrease in circulating currency. Instead as debt is paid down there is a transient dip in circulating currency and some banks may find themselves short on reserves. To replenish these reserves these banks simply borrow the needed reserved from other banks. This rate of interbank lending is called the federal funds rate. If enough debt is paid off the demand for reserves may cause the federal funds rate to climb via simple supply and demand. However the federal funds rate strictly controlled by the FED which sets a target for what this rate should be. If the federal funds rate starts to climb the FED simply drives it down to its artificial target again via open market operations. Thus the currency that was removed by paying down debt is simply reinjected back into the economy by the FED. The end effect of paying down debt is not a change in circulating currency but an increase in the central banks balance sheet. I wrote the following post exploring this in more depth and it's ultimate instability. Finance Part I: Understanding the Parasite

3) In your third "fact" you state "payment of all loans does not equal leverage of new loan entitlements" You seem to be saying that debt can be paid off without more debt being taken out elsewhere in the economy. I would challenge this as also false. The only real method of getting rid of debt in our current system on a macro level is some form default with subsequent seizure of the collateral underlying the loan. Simplistic flow scenarios such as Sally owes John $100 who owes Tom $100 who in turn owes Sally $100 represent a very small portion of total debt. The article linked below does a nice job of explaining why it is mathematically impossible to pay off the national debt.

http://www.zerohedge.com/news/2015-05-22/it-mathematically-impossible-pay-all-our-debt