Economy Rigging 1

BSK log 27/08/10 August 28, 2010

Filed under: Uncategorized — bashstreetkidjailbreak @ 4:51 pm

ITEM 1

Very incisive debate here between myself and blogger on DMcW’s blog on the topic of the DEBT MONEY system.

WILLS:

Flash, Malcolm, PMC.

All savings come from a debt somewhere else in the system.

All paper money and credit is made out of debt.

Pay all the debt and the savings vanish.

This is the debt money system we all live in thanks to the bank of England set up in 1694.

FLASH:

Spot on wills. Money and savings can’t exist without debt on the other side. As I said if you really get into the cause and effect in many ways it was German efficiency and savings that paradoxically led to asset bubbles elsewhere in the eurozone. The same happened with China. thats one of the drawbacks of globalisation.
If anyone wants to understand money, try this video out on youtube. He understates the benefits of credit money (innovation etc) but otherwise explains its brilliantly. If you want a counterbalance to this (ie promoting the benefits of credit money) read The Ascent of Money by Nial Ferguson.

WILLS:

Flash.

Your conclusion ‘ ..it was german savings that lead to asset bubbles.’

Flash, it is not the generation of savings which causes bubble, its the generation of debt.

You’ve got it backwards Flash.

And its precisely this jigerry pokerry that the backroom yobo policy makers use to justify PLUNDER.

FLASH:

Wills, debt and savings are the same thing. You have said so yourself. It’s a cycle and therefore not a true cause and effect, its more like chicken & egg. But having thought about it for a long time I think the cause is more on savers side, because of human nature.
A generation of savings for one person is a generation of debt for another. That is unavoidable. The debt in the system that has ballooned over the past 40 years is due to the baby boomers (and of course the Nixon shock, ie the US coming off the gold standard). From 70s to 90s they bought their own houses, from the 90s they had done that and are left with savings. That glut of savings in the system must manifest itself in debt elsewhere. Thats what people have to understand. A debt generation and a savings generation are different sides of the same coin. And this creates an avalanche as the growth is exponential. It inevitably has to collapse but the view is that for some mysterious way only the borrower suffers. That can’t work, its impossible. Its a two way street. The only way the borrower suffers with no impact on the lender is accounting jiggery-pokery (i.e. holding things at ‘cost’ on your balance sheet and denying the problem). Think it through. If 95% of money is credit money created by the commercial banks where does the interest comes from? They only created the principal not the interest. Yet the borrower is expected to pay this back and the savers earns it, but the money for the interest was never created, it arises because more money is borrowed to pay back the interest on the old. That is the monster that modern money has become. That works for a while but its an exponential system. In the laws of physics all exponential systems have to eventually collapse. Indeed, the lack of understanding of the exponential functions is one of humanity’s greatest weaknesses (check out:
http://www.youtube.com/watch?v=F-QA2rkpBSY).
Anyway, my point is that this saver/borrower system cant continue. It eventually has to collapse. For governments to spin the story that saving is brilliant is false – that only works if there are borrowers elsewhere. This is exactly what is happening in China today. The government is encouraging everyone to save, save, save. It has caused a massive asset bubble in the US and a massive glut in US borrowing. Eventually that has to give and the Chinese savers will see their savings fall apart. By the way globalisation and the end of the gold standard are the systemic problems that allowed this to happen, otherwise China’s savings bubble would have manifested itself at home and burst far quicker (there is a big enough bubble there already though!)
I’ve said before that I am a substantial net saver. I never bought a house during the boom thinking I’m clever. Now I have all this cash wondering where I put it as I’m concerned the I will eventually have to suffer too at some point. I just don’t believe the fallacy anymore that cash is king and can’t lose value. I’ve learned over the past year studying it that that is impossible. So I am a realist: I am in an as much of a quandary as the borrowers.

WILLS:

Realism talking here.

Only one way to fix the money debt system plumbing madness.

Return money issuance to sovereign money.

No other way, money is a utility for the people and selling and buying money for profit is doomed to endless failure.

Its the elemental laws of the cosmos, similar to, gravity, and, shagging your sister, which I would NOT recommend.

WILLS:

Let me beak it down then this concept of mine.

Now it goes like this……

The debt money system has a starting point.

It is a closed system with a originating point.

Which is, the, making of a debt.

The issuance of credit that comes after the debt made to make the credit is a seperate concept.

FLASH:

Wills, you said earlier:
“All savings come from a debt somewhere else in the system.
All paper money and credit is made out of debt.
Pay all the debt and the savings vanish.”
To me, you are saying savings and debt are the same thing. To now qualify it and say savings are a derivation of debt is rubbish. Its a cycle where one drives the other. Take the bank out of the equation (they are mere the conduit picking up the pennies in the middle), and the two of us have a piece of paper saying you owe me €100. My savings are your debt. They are the same. You have said that yourself. You just find it uncomfortable when I turn around and point out that therefore the savers are as much to blame.
Finally I would qualify your last sentence in my personal view.
The ‘debt money system’ takes the generation of savings (arguably immorally, as without their knowledge) and causes that money to be spent back into the economy by giving it to cash-hungry borrowers. This stops money sitting idle on the sidelines and keeps the system flowing. It is a system that can easily get out of control but on the other hand it has done a brilliant job at technological innovation (by savers giving vast sums of money to spotty IT geeks).

By the way your phrase:
“The ‘debt money system’ uses the generation of debt to plunder savings thru exploiting labour” is total poppycock. Savings in the modern world are nothing but promises, ie debt. They cant be plundered. The sack of wheat you kept aside for a rainy day can be plundered. Your savings were given voluntarily by you to a bank to use as they want in return for paying you interest. It that has been misused, thats not plundering. Its unfortunate and its tough luck. If you didn’t understand how banking works, then thats your stupidity.
And to say its exploited through labour is further poppycock. The modern money system benefits labour over capital. Look at the world around you. The working generation is far better off. Thats because the capital generation were fooled by governments into giving up their savings into banks and its has been redistributed to the working generation to utilise it. Similarly it happened with pensions too. Pensions bought bonds which is money lent to the government which they have used to create the modern welfare state. The welfare state didnt come into being because we thought it would be a lovely idea, its the growth of pension money that created it. the money had to go somewhere, so governments thought hey we’ll take it and we’ll buy the voters with it. Similar the euro was a massive redistribution of wealth from German savers to the peripheries of Europe.
In many ways its my pro-labour sentiments that lead me to think its not borrowers alone that should be punished, savers should suffer too.

ALF:

Flash, Wills,
savings and debt are intrinsically linked. It will be continue as long as savers expect to walk into a private institution (i.e. a bank) and expect to get their money stored and secured for free, expect some savings interest and pretty much all their banking services free. To also expect all the banks bills and employee salaries to paid for somehow in the process.

The fact is the borrower is the payer of the vast majority of expenses of a bank. Without borrowers there would be no private banks and there would be no way to get interest without personally taking all of the risk of loss.

We have accounts which give interest ‘magically’ but protect the saver from any loss (except where the bank goes bankrupt). If everyone keeps saving and borrowing is shunned then this system will have no way to pay for itself. It is this because of this ’service’ that borrowers provide that really justifies a process of bankruptcy, write offs and defaults.

After all, the banking system overhead can’t be paid for exponentially without those willing to take risks

WILLS:

Let me beak it down then this concept of mine.

Now it goes like this……

The debt money system has a starting point.

It is a closed system with a originating point.

Which is, the, making of a debt.

The issuance of credit that comes after the debt made to make the credit is a seperate concept.

FLASH:

disagree. Imagine the following scenario where there is just you, me and a bank in existence.
You walk up to bank and fill in a form to borrow €100. They then magically create the money into existence doing the following to their balance sheet:
Asset: Loan from you worth €100
Liability: Loan to you of €100 (i.e. you bank account)
We’ll ignore interest. Similarly I’ll ignore capital ratios (only 5% anyway)
Now so far the money supply has been increased but its circular. They have created money that is merely owed to yourself. Without anyone else there is nothing that can be done. The bank has no other customers. You can’t spend your money.
If I now put savings into the bank then that brings another party into the system and I effectively become the net lender in the system – the bank can go off and use my actual money however they like (I gave it to them, they now owe it to me), they can use it for when you want to withdraw the cash or they can just spend it on salaries. Whether your loan or my savings started the cycle is totally irrelevant. At some point you will have two parties, then you have created full functional credit money. But until you have both parties it doesn’t work. You need a saver and a borrower to create each euro of money in existence (this also actually applies on bank notes, thats merely an IOU from the central bank – read the back of an english £20 – its a promise from the bank of england to pay you £20, that was once 20 pounds of silver, nowadays its £20 ie they will just repay you with another note again!!!)
Banks will have shortages of savers and borrowers from time to time. They merely encourage the other side to make up the difference. During the savings glut of the early 00s, the bank encouraged everyone to borrow so they could utilise the savings they had taken in. Right now its the opposite. The banks have more than enough borrowers, they want more savers as there is a shortfall so they are encouraging all of us to save and they can repair their balance sheets, eventually allowing the government to step back (the government is plugging the gap though another accounting fiction).
So savings and debt are the same. You can’t have a world where everyone saves and nobody borrows. Its completely impossible.

WILLS:

Flash, you say,

‘You can’t have a world where everyone saves and nobody borrows. Its completely impossible.’

In a debt money system it is.

But, savings and borrowing in the debt money system are two seperate concepts despite been linked together.

To asset that savings and debt are the sam thing is erroneous and a false statement.

Savings and Debt are linked BUT are NOT the same thing.

Got it.

Good.

ITEM 2

Catherine Austine Fitts – Financial coupt d’etat.

Financial Coup d’Etat at The Catherine Austin Fitts Blog

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