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Politics : Mainstream Politics and Economics -- Ignore unavailable to you. Want to Upgrade?

To: Little Joe who wrote (6814)	1/13/2012 12:51:16 AM
From: grusum	Read Replies (1) \| Respond to of 85487

Under a fractional reserve system banks create what I call debt money, by effectively just creating money i.e. debt out of thin air. If a bank makes lends you money for a mortgage you likely over the course of 30 years, will pay more than 100% of your principal over the life of the loan. Except for coin all money is debt, the creation of debt increases the money supply and the payment or liquidation of debt reduces the money supply. every transaction involves debt. the debt you talk about is a government obligation, which is the currency owner's asset. Except for coin all money is debt, even coin is debt if it has a dollar value stamped on it. the only type of coin that isn't debt, is metal by weight. While the FED , not the FDIC, did allow the reduction in the quality of loans, and decreased the reserve rates, it did so largely to avoid economic collapse. i didn't say the FDIC did those things. i said without the FDIC, those problems would never have been created by the banks. there would have been no economic collapse if interest rates were allowed to float. it was the FED's hubris of pretense to knowledge that caused the problems. If the FED had stopped or reduced credit creation in a meaningful way this would have occurred sooner but been a much milder depression, maybe just a recession. this what raising interest rates does. interest rates would have been higher with a free market in money. Another consequence of the system is that an inordinate amount of money is redistributed to banks and other financial entities as interest payments begin to consume more and more of the economy. This is exactly what we are experiencing today. We aint getting out of this without a lot more pain. We need a monetary system that rewards producers not rent seeking banks that are licensed to profit from people who do produce. you can have it if you want it. but you won't like it when you get it. you'll be keeping your money under your mattress or you'll be paying banks to hold it for you. the big projects that create a lot of wealth will be much harder to finance, so there will be much fewer of them. then there will be fewer jobs and for lower pay. we will be much less wealthy as a nation. i don't believe the 'money as debt' videos that are making the rounds. i believe they have mislead us. i don't think they know how the FED really works.