Money As Debt

[Ron]

Anyone here ever watch this animated short about our money system? I found it to be reasonably accurate as to the way things works as far as I understand our monetary system.

http://www.youtube.com/watch?v=vVkFb26u9g8&feature=related

[AJ Dual]

Meh.

When it comes to the actual core nature of money, I wish we had economic geniuses on the Hawking/Einstein level. The "smart" ones simply say, leave the market alone in a variety of ways. The dumb ones are Keynesian, or worse.

Commodity money has tangible worth, like the gold standard etc. However all the gold in the world (including what's in the ground) does not represent enough liquidity to represent the world economy. And everyone forgets there can be horrible contractions, or other disastrous things like people trying to corner the market.

Fiat money can be produced in sufficient quantity to properly represent the economy, but it has the other obvious flaws. Debt issue, inflation etc.

It's really Hobson's choice when it comes to what kind of money you use. Both methods have serious flaws in the modern industrial/post-industrial world.

[Ron]

Meh.

When it comes to the actual core nature of money, I wish we had economic geniuses on the Hawking/Einstein level. The "smart" ones simply say, leave the market alone in a variety of ways. The dumb ones are Keynesian, or worse.

Commodity money has tangible worth, like the gold standard etc. However all the gold in the world (including what's in the ground) does not represent enough liquidity to represent the world economy. And everyone forgets there can be horrible contractions, or other disastrous things like people trying to corner the market.

Fiat money can be produced in sufficient quantity to properly represent the economy, but it has the other obvious flaws. Debt issue, inflation etc.

It's really Hobson's choice when it comes to what kind of money you use. Both methods have serious flaws in the modern industrial/post-industrial world.

I have no disagreement with you, yet you really didn't address my question :)

There was no advocating of hard money in this animated short, are you even familiar with it or just throwing a WAG out there?

If you have watched it would you agree that it's reasonably accurate in its description of how things work, while maybe you differ on what you would consider the best option for changing the system?

[AJ Dual]

I guess I just find it humorous that this is some huge conspiracy that needs to be "shouted from the rooftops".

It's not exactly as if T-Bills, and fractional reserve banking were some sort of secret that has only come to light after Wikileaks. I guess it's good if the idea is that people just don't think about what their money "is" to take a moment and actually think about it.

And darn skippy they're pushing hard money. Or whoever (re)posted this video on Youtube is.

This is right in the video description. And all the contextual pop-up Youtube ads were for metal exchanges.

Quick and easy way to purchase silver:
http://silversnowball.com/1861/

The flip-side of course is that things would be like the third world, where home ownership is non-existent, or where three or more generations live in the same house/compound because only the top 5-1% can afford to buy an actual home/land. Or your home is what you made for yourself in the shanty-town.

(And the wealthy/powerful of those nations just have a lot of their holdings in other more reputable nation's fiat/fractional-currencies. Which acts as a sort of pseudo-hard currency in it's own right.)

The "making money out of thin air" is the banker's incentive to actually give peons like us a mortgage in the first place. It sure as hell isn't just the 7-4.5% they're earning directly from you and me. They can make that sort of return much more easily in other investments that are more secure than individual families.

The whole Ponzi-scheme aspects of modern fiat money and fractional reserve banking is not lost on me, but the alternatives are just as bad in other ways. Like having 90% of everyone you know having their note called in on their house for a pound of gold instead.

A "third way" of having money that does not suffer the drawbacks of fiat/fractional, or hard money would be great. (Those metals are more useful in industry/technology than as decoration or as "money" anyway. Hell, even the Hope diamond is arguably more "useful" as a drill-bit than it is just staring at it.)

I just can't for the life of me dream as to what such a "fair" and stable money system actually is.

Short term, my best answer to "fix things" is to do more of what happened in the last Fall '10 elections, and in the '94 elections. Elect people who don't believe in wealth transfer and disincentives to economic growth so we can afford the "Ponzi Scheme" until something better comes along.

I do have vague ideas about game-theory, mathematics, the Internet, and strong encryption making some sort of "money" that can't be cheated, counterfeited, or have it's supply contracted or expanded unfairly.

The other is simply to "hang on" until such time as technology, automation, AI, nanotech, biotech, etc. pushes humanity into the "post scarcity" society, where there's no need for competition for the basics of life and a minimum standard of human dignity. "Money" may still change hands but it's for prestige things, like art, personal services, or what luxury items the technology base can't or won't make or have extra "mojo" because they were human-made.

We see some signs of this today. Like how a black rubber digital $5 watch from Walmart keeps better time than some Swiss hand-crafted thing that you have to wind every day, and has a sharkskin band etc.  You're paying for the prestige with all the hand crafted work and (needless) complexity of the Swiss product.

[Ron]

OK, so you didn't watch the video, that was a long way of saying it  

I only saw the silver link, no other ads or pop-ups make it to my monitor.

The video does not endorse a hard money policy, at all. The failings and weaknesses of hard money are acknowledged.

They propose some form of fiat currency, where money supply is controlled by the Fed Govs spending on infrastructure and other Fed programs. Inflation is controlled through tax policy. Instead of dollars being units of debt they would be units of value or some such thing.

No credit expansion economy using fractional reserve banking. Still a fiat based currency though, just not one that can be gamed for the bankers and money guys in the markets (as easily). Putting money policy back in the hands of those who are accountable to the public may not be a bad thing either.

[AZRedhawk44]

Ahem.

I watched all 5 parts.

I enjoyed it, especially the way it presented what would happen to money if a finite supply existed but interest was still charged.  As long as interest is charged, the money supply (arguably) cannot be finite since interest the interest component will consume the non-interest component.

A new concept to me was the notion that consumer demand can actually deflate/shrink the money supply.  That it isn't some sort of mystic cabal that controls that... just a lack of demand for credit or debt.

It's a hard line to walk, with the existing system:  Too much credit creates too much debt and inflation.  Too little new credit stalls the economy.

The thing I don't "get" with all the folks opposed to gold as a standardized currency...  Everyone says there isn't enough of it.  However, when the demand for something goes up, it value increases.  If the economy needs to grow and needs currency to do it, then the value of gold goes up and the amount used per transaction goes down.

[zxcvbob]

I've seen it before.  The part that I hadn't really considered before is that a certain default rate is built into the system because there is not enough money available to pay all the debt.  And if everybody did pay off their debt at once, the currency would collapse.

(AZRedhawk44, is that "Monkey Lover"?  I haven't seen a JoeCartoon reference in years)