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According to some "red pill" internet films (like "Zetigeist Addendum"), money is creayted as debt. Or money and debt are sort of equivalent. Every existing dollar (in paper or electronically) is manifestation of debt - it is owned to someone by someone. Even every dollar from government's "coffers" is exchanged from a Central Bank for government's bonds. If all debts were returned somehow, there would be no dollars existing.. provided that no interest rate is charged. And with the interest rate... there is not enough money around to return the debt. Cancelations and foreclosures are guaranteed.
by das monde on Wed Dec 17th, 2008 at 05:12:21 AM EST
According to some "red pill" internet films (like "Zetigeist Addendum"), money is creayted as debt.

The problem is that you don't need a "red pill" film to show this and doing so detracts credibility from the critique because it makes it sound like it comes from conspiracy nuts.

It's called Fractional-reserve banking

The process of fractional-reserve banking has a cumulative effect of money creation by banks. In short, there are two types of money in a fractional-reserve banking system:
  • central bank money (money created by the central bank regardless of its form (banknotes, coins and electronic money loaned to commercial banks))
  • commercial bank money (money created through loans in the banking system) - sometimes referred to as chequebook money[9]
When a loan is funded with central bank money, new commercial bank money is created. As a loan is paid back, the commercial bank money disappears from existence.
(my emphasis)

This is standard monetary practice. If it's a conspiracy or a scam, it's hidden in plain sight.

Most economists teach a theoretical framework that has been shown to be fundamentally useless. -- James K. Galbraith

by Migeru (migeru at eurotrib dot com) on Wed Dec 17th, 2008 at 05:28:12 AM EST
[ Parent ]
I was thinking about having all negative accounts reset to zero, rather than paying off the debts--just simply do away with them.

I wondered what would happen if this was done globally, overnight.

The only losers I can see are "investors", i.e. those who owed money.  At present, it seems that our banking systems is chewing up investors assets (monies owed) at a phenomenal rate, while ALSO building up debts left, right, and centre for them and everyone who doesn't have any investments.

If all debt were cancelled overnight, any credits would remain credits, but all debt would be gone, so the worst case scenario for all--individual, organisation, country, etc.--would be a zeroing.

I know it can't and won't be done, but I was interested to know why having all this debt (everyone owing other people and the pile becoming bigger, and I am very hazy as to who, apart from some small banks across the planet, has the [moral] credit to lend us the money that is building up debt--and interest, I expresseth it badly of course) is somehow better or more sensible than clearing everyone's debt in one go.

Don't fight forces, use them R. Buckminster Fuller.

by rg (leopold dot lepster at google mail dot com) on Wed Dec 17th, 2008 at 06:38:30 AM EST
[ Parent ]
those who owed money

those who are owed money

Don't fight forces, use them R. Buckminster Fuller.

by rg (leopold dot lepster at google mail dot com) on Wed Dec 17th, 2008 at 06:39:35 AM EST
[ Parent ]
There is a qualitative difference between:

(a) unsecured credit ("time to pay") which allows "money's worth" to circulate, and

(b) secured credit - which is essentially static, and is repaid from payments which people make in relation to the "use value" of the money's worth created eg buildings or (in the case of land, and knowledge) an "enclosed" Commons.

The vast bulk of money in existence is in fact "tied up" in productive assets, mainly land, but increasingly, knowledge. It's not actually circulating at all.

The solution I advocate is for secured credit to be replaced by a new generation of "Equity" consisting of what is essentially fractional ownership of land, and the value invested in it.

Such Units - being exchangeable for the right to occupy land - would be generally acceptable in the relevant area.

Cross border value exchange, on the other hand, requires a global reserve currency, and the logical candidate for this is a Unit redeemable in energy.

The point I am getting to is that the circulating credit obligations to which you are referring (our existing IOU money) do indeed have a "zero sum". However,the bulk of credit ever created in fact not circulating and is tied up in claims over productive assets which have anything but a zero sum.

We call this a "National Debt", and what is needed IMHO is an evolution to a "National Equity" - giving rise to a citizen's dividend, among other things.

Unfortunately the ownership of these productive assets has become concentrated in fewer and fewer hands, because the "Debt/Equity" financial system - and all the rhetoric and structures which back it - has evolved in this way, to have this effect.

This is not because an "Intelligent Design" (Illuminati, Bilderberg etc) is behind it and planning it, but because the motivating self interest of the whole class of those in power has driven the evolution of these frameworks.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Wed Dec 17th, 2008 at 09:04:17 AM EST
[ Parent ]
But the bank owes you money (at least if you have savings...). And the government owes you money if you have cash. So wiping out all debt would end up with nobody having any money. Effectively, what you'd get would be a transfer of wealth from those who currently hold money to those who currently hold the means of production. In other words, it would transfer wealth from your pension fund to the most leveraged companies...

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sat Dec 20th, 2008 at 07:23:27 AM EST
[ Parent ]
So you'd only wipe out usury - slash credit card and loan repayment rates but strictly limit further borrowing, pull interest rates on mortgages close to zero, reinforce credit lines to small businesses, generally push banks to stop ripping off their customers with punitive borrowing charges and return them to a less dramatic but more useful service-based industry.

We've seen that governments really are the lenders of last resort in most economies anyway - so governments should step in as grown ups and manage debt intelligently rather tha running around trying to pour petrol in random corners and hoping that something happens.

The hedge funds are a completely different issue. I can't see any reason why hedge funds, or any similar market mechanism, should be legal. Closing them down and handing out whatever remains, no matter how small it is, would be a useful controlled demolition and eliminate a lot of market uncertainty.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Sat Dec 20th, 2008 at 07:37:56 AM EST
[ Parent ]

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