George Orwell’s classic 1984 describes “doublethink” as holding two contradictory beliefs simultaneously and accepting both. To do so denies the existence of objective reality. A good example is the belief in economic theories that contradict mathematical facts.
Both Austrian and Keynesian economic theories hold fundamental beliefs that do not square up with math. The exponential growth of debt in our debt based money system is ignored and refuted by both theories. In place of math, we are offered beliefs such as the “quantity theory of money.”
To deny the exponential growth of debt cuts to the very core and credibility of monetary theories. If the exponential growth can be proven, then equally, Austrian and Keynesian theories are dis-proven. Economic theories hide the fact that a debt based money system is usury by definition and neither Austrian nor Keynesian theories are sustainable. Both systems create bankruptcies and defaults while enriching banks at the expense of the people.
The inherent and terminal mathematical flaw of debt based systems can be proven anecdotally. Our total money supply (M3) is around $15 trillion while our national and private debt total around $55 trillion. How do we pay an existing $55 trillion in debt with a total of $15 trillion? We are short $40 trillion, where will that money come from?
In our debt based monetary system there is only one way to add money and that is through new debt. Eventually, the $40 trillion must be borrowed. If the money is borrowed, it will add new debt of over $40 trillion (principal + interest). The debt can only grow, it can never be repaid as the gap between money and debt will continue to increase.
The two economic theories will try to explain away this reality by claiming that the velocity of money can be increased so that a given amount of money can be used for more transactions. This is true when we spend money but it is not true when we repay debt. When debt is repaid it is extinguished, that is that the money ceases to exist which means that money can only be used to repay principal debt once. Most of the interest debt returns to circulation but never the less, the gap between money and debt will still increase since only the principal is created through new debt which brings new interest.
The specie of money doesn’t matter. If our money were backed by gold, the gold would simply be transferred to those who collect the interest. We saw this in 1933 when the gold standard collapsed and we lost most of our gold.
The two prevailing economic theories give us a false sense of choice just like the two party system of Democrats and Republicans. The science of money has been replaced by a belief system just like in the dark ages when science was dominated and defined by religious beliefs. If the next renaissance is to happen, it will come when the science of money displaces unfounded beliefs.
We are suffering from an intellectual amnesia. The Babylonians of antiquity understood the destructive power of debt interest and at one time Christianity and Judaism forbid it as sinful usury. The Islamic faith still forbids debt interest and perhaps that is a reason that we are clashing.
Our debt based monetary system is a form of usury that will result in the transfer of all wealth from the many to the few. The intended outcome is debt slavery and tyranny under the cruel boots of oligarchs - a financial aristocracy.
People are becoming discontent and they sense that something is terribly awry. To rebel against the status quo invariably leads to another tyranny as we have seen through democratic elections and third world rebellions.
If a successful peoples revolution is to happen it will really be an awakening. A higher consciousness where we come to understand how and why the game has been rigged by flawed monetary theories.
K, let's save time and skip long rants... is this the compound interest paradox?
To darkness I condemn you...
I smell another trainwreck thread...
we're getting a lot of these lately :(
"It has always been the prerogative of children and half-wits to point out that the emperor has no clothes. But the half-wit remains a half-wit and the emperor remains an emperor." ~Dream
DrKrbyLuv: To deny the exponential growth of debt cuts to the very core and credibility of monetary theories. If the exponential growth can be proven, then equally, Austrian and Keynesian theories are dis-proven. Economic theories hide the fact that a debt based money system is usury by definition and neither Austrian nor Keynesian theories are sustainable. Both systems create bankruptcies and defaults while enriching banks at the expense of the people. The inherent and terminal mathematical flaw of debt based systems can be proven anecdotally. Our total money supply (M3) is around $15 trillion while our national and private debt total around $55 trillion. How do we pay an existing $55 trillion in debt with a total of $15 trillion? We are short $40 trillion, where will that money come from? In our debt based monetary system there is only one way to add money and that is through new debt. Eventually, the $40 trillion must be borrowed. If the money is borrowed, it will add new debt of over $40 trillion (principal + interest). The debt can only grow, it can never be repaid as the gap between money and debt will continue to increase.
You poor souls who have bought into the "Mathematically Perfect Economy" are laboring under a SEVERE misapprehension.
I'll ask you the same question I asked your compatriot LIBERterryAN, even though he declined to even address it.
If debt necessarily requires exponential growth in the money supply, then how is it that the following debt scenario quite obviously requires absolutely no additional growth in the money supply?
Lilburne: LIBERterryAN: If there is $100 of gold money in circulation, and I borrow all $100 of gold money, at (say) 10% interest, then there is only $100 of gold money in circulation. But, at the same time, $110 of debts exist. Question: Is it not impossible to pay back the debt? No. Let's say you borrow that money from me. Over the course of the year, you do work for me for which I offer you a $60 salary. On the last day of the year, I don't pay you the $60 in gold; I just deduct it from what you owe me. On that same last day of the year, you pay me the remaining $50 you owe me out of the $100 of gold you still have. That's it.
LIBERterryAN: If there is $100 of gold money in circulation, and I borrow all $100 of gold money, at (say) 10% interest, then there is only $100 of gold money in circulation. But, at the same time, $110 of debts exist. Question: Is it not impossible to pay back the debt?
If there is $100 of gold money in circulation, and I borrow all $100 of gold money, at (say) 10% interest,
then there is only $100 of gold money in circulation. But, at the same time, $110 of debts exist.
Question: Is it not impossible to pay back the debt?
No. Let's say you borrow that money from me. Over the course of the year, you do work for me for which I offer you a $60 salary. On the last day of the year, I don't pay you the $60 in gold; I just deduct it from what you owe me. On that same last day of the year, you pay me the remaining $50 you owe me out of the $100 of gold you still have. That's it.
I know it's hard to own up to a very basic mistake, especially when so much time and energy has already been invested due to it. But, you have an anonymous username, so there's an easy way out.
Human Action Comics Issues 1-6
DrKrbyLuv:In our debt based monetary system there is only one way to add money and that is through new debt. Eventually, the $40 trillion must be borrowed. If the money is borrowed, it will add new debt of over $40 trillion (principal + interest). The debt can only grow, it can never be repaid as the gap between money and debt will continue to increase.
Hello Lilburne,
Thanks for responding. Let me take a satb as answering your questions:
"No. Let's say you borrow that money from me. Over the course of the year, you do work for me for which I offer you a $60 salary. On the last day of the year, I don't pay you the $60 in gold; I just deduct it from what you owe me. On that same last day of the year, you pay me the remaining $50 you owe me out of the $100 of gold you still have. That's it".
Personal loans and money earned is not newly created - existing money is transfered between individuals.
In our debt based system, money is created as an electronic entry on a bank's computer. The repayment of that debt is what will cancel the bank entry. Before it is repaid, it can be personally lent or spent over and over.
All of our money is temporary as it must eventually be repaid or written-off through default. If new loans are not created, the money supply will decrease every day by the amount of principal repaid (or greater). Money is being destroyed constantly which means that new loans are required to offset the "leakage."
Eventually, there will not be enough wanting and worthy private borrowers. That's when the government steps in to act as the borrower of last resort. That's where we are today. If the government stops running huge deficits, the system will contract, that is how depressions happen.
Larry
DrKrbyLuv:The inherent and terminal mathematical flaw of debt based systems can be proven anecdotally. Our total money supply (M3) is around $15 trillion while our national and private debt total around $55 trillion. How do we pay an existing $55 trillion in debt with a total of $15 trillion? We are short $40 trillion, where will that money come from?
That's where the fallacy is. The money can pay the debt by being passed around, obviously. Some people both owe money and are owed money.
money crank alert
Jeffrey TuckerEditorial VP, Mises
"That's where the fallacy is. The money can pay the debt by being passed around, obviously. Some people both owe money and are owed money."
is the debt-money a problem when 'the money' goes to something other than someone being owed?
is the debt-money a creation of govt caprice that a market couldnt do? or this that the wonderfulness of having govt control the 'money'?
DrKrbyLuv:The exponential growth of debt in our debt based money system is ignored and refuted by both theories. In place of math, we are offered beliefs such as the “quantity theory of money.”
Huh? The "exponential growth of debt?" There is no empirical or theoretical reason to believe that debt must grow exponentially.
DrKrbyLuv:To deny the exponential growth of debt cuts to the very core and credibility of monetary theories.
How so? Prove your statement.
If the exponential growth can be proven, then equally, Austrian and Keynesian theories are dis-proven.
Again, how so?
DrKrbyLuv:ur total money supply (M3) is around $15 trillion while our national and private debt total around $55 trillion. How do we pay an existing $55 trillion in debt with a total of $15 trillion? We are short $40 trillion, where will that money come from?
When you pay back debt, the money you paid that debt with doesn't suddenly disappear. It simply goes to the creditor. The creditor then spends, saves, or invests that money. In other words, most of that money goes back into the economy and it probably enters the income stream of another debtor who then can use that money to pay back his debt. Thus, there can easily be more debt than money.
DrKrbyLuv:In our debt based monetary system there is only one way to add money and that is through new debt.
Not true at all. Most of the money that the Federal Reserve creates is through the purchase and monetization of government bonds. In other words, the Fed actually reduces the amount of debt when it expands the money supply.
Then again, Austrians are not fans of central banking or the current state-managed banking system. So why do you criticize the current banking structure and then claim that this is somehow an attack against the Austrian school?
DrKrbyLuv:This is true when we spend money but it is not true when we repay debt. When debt is repaid it is extinguished, that is that the money ceases to exist which means that money can only be used to repay principal debt once.
No, when you repay debt, the creditor receives the money. The creditor then spends a portion of that money, feeding the income stream of other debtors. The portion of that money that the creditor lends out again is then spent by the debtor, so that that money enters the income streams of other debtors, thereby enabling them to pay off their debt. Basically, it's a giant web of interactions that enables the debt to be greater than the money supply.
DrKrbyLuv:If our money were backed by gold, the gold would simply be transferred to those who collect the interest.
Again, debt repaid would simply be spent by the creditor or the creditor's other debtors, thereby enabling the repayment of other debt.
We saw this in 1933 when the gold standard collapsed and we lost most of our gold.
Not at all. What happened in 1933 was that the money supply shrank when the Fed raised rates in order to stem the outflow of gold to other countries. At the time, the USA was the greatest creditor nation. That, according to your theory, is an impossibility.
DrKrbyLuv:If the next renaissance is to happen, it will come when the science of money displaces unfounded beliefs.
Unfounded beliefs like those that state that we have a "debt based monetary system." What bullocks.
DrKrbyLuv: We are suffering from an intellectual amnesia. The Babylonians of antiquity understood the destructive power of debt interest and at one time Christianity and Judaism forbid it as sinful usury. The Islamic faith still forbids debt interest and perhaps that is a reason that we are clashing. Our debt based monetary system is a form of usury that will result in the transfer of all wealth from the many to the few. The intended outcome is debt slavery and tyranny under the cruel boots of oligarchs - a financial aristocracy.
Non sequitur, non sequitur, non sequitur... Seriously, is there anything that you say that follows? How is charging interest harming society?
Mises Community Natural Rights Discussion Group
Austrian economics does not *fail* if its discourse on free currency differs from the realities of government fiat currency...For example,
if we had a central bank that printed money every other year and if the serial numbers on the bills summed to your mother's maiden name they wouldn't work and if the value of odd numbered bills doubled on alternate leap years and if even numbered bills could be exchanged for their weight in energy bars and if bills folded into airplanes were programmed to self destruct,
what would happen?Uhoh the Austrians (and everyone else) can't tell you. I guess that means Austrian economic theory about free currency is wrong.derp derp derp derp derp derp derp.What is with these trainwreck threads? We have some bad ones lately... And whats sad is that educated thread-makers get relatively few responses and bad threads get a lot of responses since the topics are intolerably stupid.
sthomper: is the debt-money a problem when 'the money' goes to something other than someone being owed? is the debt-money a creation of govt caprice that a market couldnt do? or this that the wonderfulness of having govt control the 'money'?
No, government control of the money supply can increase the amount of debt (and of money, and of lots of other things) but does not alter the underlying fact. I don't know what you mean by the money going to something other than someone being owed. It's just a simple mathematical relationship that, independent of the amount of debt, the "overlap" is always enough that all the debt can be paid back. If you loan me a dollar, and I loan it back to you, and you loan it back to me, and we repeat the process a thousand times, then on the books we'll each have debts of a thousand dollars, and since there's only one dollar in circulation, the OP will say the debt can never be repaid. But of course it can - I'll give you back the dollar, you'll use it to pay me back, I'll use it to pay you back, and so on until all the debt is wiped out. Now try to create a situation where we pass the dollar around and create debt that cannot be paid back. Sure, there are some people who are owed money and do not owe money, but they're all accounted for.
There are plenty of evils to attribute to the banking and government systems. There's no need to create evils that don't exist.
Notice, by the way, that in my example we did something worse than fractional reserves, and had no reserves at all, yet it didn't alter the basic accounting relationship.
What happens to money after it is spent towards a debt? Is it destoryed? Nope, its stil in circulation available to be spent towards a different debt.
im confused then.
if a frb bank lends 90percent of $100 deposit and leaves $10 plus $90credit .... yielding a total of 100 dollars+dollar credits .... when the $90 is repaid isnt the $90credit removed?
is this what the author meant by "When debt is repaid it is extinguished, that is that the money ceases to exist which means that money can only be used to repay principal debt once."
Hi Larry,
Let's keep things simple for now. You contend that the problem of "usury" requiring exponential money growth would occur even in a specie-based system in which money cannot be just entered into a computer...
DrKrbyLuv:The specie of money doesn’t matter. If our money were backed by gold, the gold would simply be transferred to those who collect the interest.
So then how does that contention agree with the fact that no monetary expansion is required in my hypothetical gold-based scenario...?
sthomper:if a frb bank lends 90percent of $100 deposit and leaves $10 plus $90credit .... yielding a total of 100 dollars+dollar credits .... when the $90 is repaid isnt the $90credit removed?
When it is paid back, the bank has $100 on hand, just enough to pay the depositer (a bank deposit is really just a loan to the bank.) The depositer can now pay whatever he owes to anyone else, up to $100... what's the problem?
the authors post stated this
"When debt is repaid it is extinguished, that is that the money ceases to exist which means that money can only be used to repay principal debt once."
earlier in this thread there was some discussion of whether debt is destroyed when repaid.
i was wondering if the post author was referring to frb bank credit when he mentions the money ceases to exist when debt is repaid.
i didnt say anything about a problem.
"To deny the exponential growth of debt cuts to the very core and credibility of monetary theories. If the exponential growth can be proven, then equally, Austrian and Keynesian theories are dis-proven. "
i am not quite sure what this means.
www.economagic.com says (if true) that "currency in circulation" which i assume is "money" is at 915 billion
economagic.com also says that m2 (minus 915 billion in currency in circulation) is at about 7.5 trillion.
i am not sure what the proper term for the 7.5 trillion things is. is it debt, dollar-credit????
economagic.com says that currency in circulation (aka MONEY) in 1960 was at about 34 billion
and m2 minus 34 billion in CiC was at 300 billion.
it all seems exponential to me.
sthomper: the authors post stated this "When debt is repaid it is extinguished, that is that the money ceases to exist which means that money can only be used to repay principal debt once." earlier in this thread there was some discussion of whether debt is destroyed when repaid. i was wondering if the post author was referring to frb bank credit when he mentions the money ceases to exist when debt is repaid.
I don't know what he meant. My point in posting was to point out that you can see the fallacy in his thinking by just looking at the line I responded to.
"I don't know what he meant. My point in posting was to point out that you can see the fallacy in his thinking by just looking at the line I responded to."
the information about frb was my thinking....the post author never broght up the frb scenario, which i described as i have read at mises.org sites.
is there an instance in the existing bankning system where debt(also bank credit?) is destroyed or removed when repaid?
Ludwig von Mises Institute | 518 West Magnolia Avenue | Auburn, Alabama 36832-4528
Phone: 334.321.2100 · Fax: 334.321.2119
contact@Mises.org | webmaster | AOL-IM MainMises
Mises.org sitemap