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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: RetiredNow who wrote (260851)	7/14/2010 5:14:18 PM
From: Skeeter Bug	Read Replies (1) \| Respond to of 306849

mm, those 5 people still owe more money than exists. why? well, their money supply was borrowed from the federal reserve - say $500k. so $500k exists, but interest started accruing right away. after 1 year, they owe $525k at 5% interest. the problem is, they can't pay off $525k with $500k. this is how our system works. yes, it is a simplified example, but it is accurate in the essentials. btw, this is why growth is REQUIRED to prevent COLLAPSE. in order to make that $525k (and constantly accruing interest), every more debt has to be taken on, requiring ever more interest payments until... until private society's maximum ability to take on debt is reached (liar's loans, NINJA loans, reverse amortization loans, etc) - which happened in 2007/2008. now the government is forcing more debt down everyone's throats, but that will stop eventually. then... DEFLATIONARY COLLAPSE b/c there is more money owed than exists making previous debts IMPOSSIBLE TO REPAY. >>The benefit of a medium of exchange the supply of which can be increased or decreased with minimal friction (transaction costs) is that you can right size it to allow for full potential growth, while minimizing friction.<< that ISN'T our monetary system. paying 3-17% annually isn't "minimal friction." money is debt, BY DEFINITION (everything except coins). car NOTE. house NOTE. federal reserve NOTE. all represent an obligation to pay debt.