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Forum Post: Central banks create money, And commercial banks create credit. by Dr. Michael Hudson

Posted 2 years ago on Aug. 31, 2012, 8:05 a.m. EST by flip (7484)
This content is user submitted and not an official statement

(c. 23:03) “I’m going to elaborate in a different direction from what Stephanie has said. I’m going to discuss the difference between central bank credit, or money, and commercial banks. Central banks create money, you can say. And commercial banks create credit. The last three years since September 2008 have seen the largest money creation and credit creation in history in the United States. And, yet, prices have not gone up at all. That is, consumer prices have not gone up since 1980. Wages in the United States have drifted downwards for 30 years. And consumer prices and commodity prices have been stable. But there has been an immense inflation; the largest bond market price increase in history has occurred, as interest rates have fallen from 20% to only one-quarter of 1% today. What has gone up is the price of real estate, the price of bonds, the price of stocks. So, the result is that the value of wealth—and most wealth is held by the wealthiest1% of the population—wealth has gone way up relative to wages. The result is a new kind of class war, as I said last night. It’s not the typical kind of class war between employers and employees. It’s a war of finance against the economy.

(c. 25:10) “Under industrial capitalism, the idea was that credit would be created productively to fund capital investment that would employ labour. That is not what is occurring today. When commercial banks create credit, it is create claims on wealth. It is create mortgage debt. It is create corporate debt. It is to create personal debt, and student loans, and credit card debt. This is what makes commercial bank credit creation different from the central banks’ creation of money.

(c. 26:00) “When central banks create money, they do so for a long-term public purpose. They fund government spending and capital investment and public infrastructure. In most countries in the world, public infrastructure, roads, communication systems, railroads, water and sewer systems have all taken a capital investment that is larger than all the manufacturing capital investment. In the United States, the value of New York’s real estate, alone, is larger than the value of all of the plant and equipment in the United States. The result is: The textbooks that are taught in the United States ignore this difference that we have been talking about. There is a formula, MV = PT. It means an increase in the money supply increases the price level. But the price level that the textbooks talk about are only consumer prices and commodity prices. Nowhere in the textbooks do you find a relation between the credit supply and asset prices, real estate, stocks and bonds. And, yet, 99% of the credit spent in the United States economy is spent on these financial claims. Every day an amount equal to the entire year’s gross national product passes through the New York monetary clearinghouse and the Chicago Mercantile Exchange. The vast amount of payments are within the financial sector. And, within the last ten years or so, all of the growth of bank lending is to other financial institutions.

(c. 28:17) “In the textbooks there are happy pictures about banks lending to industry to build machines and factories with a smokestack coming out and employing labour. But this is a fiction; this is not what occurs in practice. All of the increased capital investment in the United States economy comes from the retained earnings of corporations—not from banks. Banks do not lend to bring new capital investment into existence. They lend against mortgages, against capital in place, against real estate, against assets that already exist—not to create new assets.

(c. 29:14) “So, when we talk about government money. We talk about government spending that is, indeed, to spur the economy, to spur economic growth, to spur new investments. The function of government investment and government central bank money creation is very different from the private banks. The government money is, indeed, debt, the lira that you have in your pocket are debt. Paper currency is debt. But it’s debt that nobody ever intends to be repaid because, if government currency is debt, than to repay it would mean that you would not have any currency left in the pocket.

(c. 30:00) “The commercial debt is expected to be repaid; and it bears interest. And, as this commercial debt has grown—the mortgages, the bank loans to companies, the corporate raiding debt—this has loaded down the economy with an enormous debt overhead. The more money commercial banks lend, the more interest has to be paid to carry this debt overhead. And the problem is that money that is spent on paying banks debt cannot be spent on goods and services. So, the result is that when commercial banks create debt, you have a diversion of income away from spending on goods and services—to pay debt service—and that is known as debt deflation. And when debt deflation proceeds as long as it has today, we move into a late stage of finance capitalism, which is the debt deflation stage—the austerity stage. And that’s the stage that Europe finds itself in today.

143 Comments

143 Comments


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[-] 3 points by beautifulworld (22211) 1 year ago

Banks are still loose cannons. Nothing has changed.

[-] 3 points by shadz66 (19985) 2 years ago

"Debt and Democracy - Has the Link Been Broken ?", by Michael Hudson :

"Book V of Aristotle’s Politics describes the eternal transition of oligarchies making themselves into hereditary aristocracies – which end up being overthrown by tyrants or develop internal rivalries as some families decide to “take the multitude into their camp” and usher in democracy, within which an oligarchy emerges once again, followed by aristocracy, democracy, and so on throughout history."

A very interesting and absorbing read, appended here to go with the excellent forum-post above.

fiat lux ...

[-] 3 points by jtland (30) 2 years ago

the Rich EARN intrest, while the Poor PAY intrest! get invovled, let your voice be heard, Http://vote-pedia.com

[-] 3 points by shadz66 (19985) 2 years ago

Corrected link : http://vote-pedia.com/ & interesting site !!

docendo discimus ...

[-] 3 points by jtland (30) 2 years ago

thank you, this is the crowd we are catering to, people who are actually working for positive change in this country and the entire world. our full platform launches at the end of the month!

[-] 2 points by shadz66 (19985) 2 years ago

Thanx for your comment & contribution as per your : http://vote-pedia.com/ & be sure to keep us posted & again 'Kucinich' saying it like it needs to be said : http://www.youtube.com/watch?v=Lv0smG7ptcM !!!

dum spiro, spero ...

[-] 2 points by shadz66 (19985) 2 years ago

Also by Prof. Michael Hudson : "Wall Street’s War Against the Cities : Why Bondholders Can’t – and Shouldn’t – be Paid" :

radix malorum est cupiditas ...

[-] 3 points by flip (7484) 2 years ago

thank you - hudson is the bomb! now i have more to read!!!

[-] 3 points by flip (7484) 2 years ago

right on - what is with so many here spouting the economics of the ruling class. i won't name names but some are really into the austrian school or ron paul or something

[-] 3 points by shadz66 (19985) 2 years ago

Re. "what is with so many here spouting the economics of the ruling class ?" - That succinct truth really warranted repetition, I felt. Thanx again and you can take this as a 'triple twinkle' ~*~ lol!

e tenebris, lux ...

[-] 3 points by shadz66 (19985) 2 years ago

Any "Austrian School Economics" that doesn't reference 'Carl Menger'' is a sort of Cultic Fraud !!! Von Mises, Hayek and onto Chicago School, Freidman BS - are all a weak foundations but huge theoretical super-structure, pseudo-intellectual, house of cards without Carl Menger's ideas about 'sound money' !! WTF 'Economic Theory' can anyone really have without some critique of "The Theory of Money", 'ffs'?

ad iudicium...

[-] 3 points by flip (7484) 2 years ago

did i ask you this already - have you read graeber - "debt the first 5000 years" - he shows the lie behind the barter nonsense - good book - long and a bit confusing but shows that hard money comes into being fairly late. here is a bit from an interview - if you like it the rest is on naked capitalism - Philip Pilkington: Let’s begin. Most economists claim that money was invented to replace the barter system. But you’ve found something quite different, am I correct?

David Graeber: Yes there’s a standard story we’re all taught, a ‘once upon a time’ — it’s a fairy tale.

It really deserves no other introduction: according to this theory all transactions were by barter. “Tell you what, I’ll give you twenty chickens for that cow.” Or three arrow-heads for that beaver pelt or what-have-you. This created inconveniences, because maybe your neighbor doesn’t need chickens right now, so you have to invent money.

The story goes back at least to Adam Smith and in its own way it’s the founding myth of economics. Now, I’m an anthropologist and we anthropologists have long known this is a myth simply because if there were places where everyday transactions took the form of: “I’ll give you twenty chickens for that cow,” we’d have found one or two by now. After all people have been looking since 1776, when the Wealth of Nations first came out. But if you think about it for just a second, it’s hardly surprising that we haven’t found anything.

Think about what they’re saying here – basically: that a bunch of Neolithic farmers in a village somewhere, or Native Americans or whatever, will be engaging in transactions only through the spot trade. So, if your neighbor doesn’t have what you want right now, no big deal. Obviously what would really happen, and this is what anthropologists observe when neighbors do engage in something like exchange with each other, if you want your neighbor’s cow, you’d say, “wow, nice cow” and he’d say “you like it? Take it!” – and now you owe him one. Quite often people don’t even engage in exchange at all – if they were real Iroquois or other Native Americans, for example, all such things would probably be allocated by women’s councils.

So the real question is not how does barter generate some sort of medium of exchange, that then becomes money, but rather, how does that broad sense of ‘I owe you one’ turn into a precise system of measurement – that is: money as a unit of account?

By the time the curtain goes up on the historical record in ancient Mesopotamia, around 3200 BC, it’s already happened. There’s an elaborate system of money of account and complex credit systems. (Money as medium of exchange or as a standardized circulating units of gold, silver, bronze or whatever, only comes much later.)

So really, rather than the standard story – first there’s barter, then money, then finally credit comes out of that – if anything its precisely the other way around. Credit and debt comes first, then coinage emerges thousands of years later and then, when you do find “I’ll give you twenty chickens for that cow” type of barter systems, it’s usually when there used to be cash markets, but for some reason – as in Russia, for example, in 1998 – the currency collapses or disappears.

PP: You say that by the time historical records start to be written in the Mesopotamia around 3200 BC a complex financial architecture is already in place. At the same time is society divided into classes of debtors and creditors? If not then when does this occur? And do you see this as the most fundamental class division in human history?

DG: Well historically, there seem to have been two possibilities.

One is what you found in Egypt: a strong centralized state and administration extracting taxes from everyone else. For most of Egyptian history they never developed the habit of lending money at interest. Presumably, they didn’t have to.

Mesopotamia was different because the state emerged unevenly and incompletely. At first there were giant bureaucratic temples, then also palace complexes, but they weren’t exactly governments and they didn’t extract direct taxes – these were considered appropriate only for conquered populations. Rather they were huge industrial complexes with their own land, flocks and factories. This is where money begins as a unit of account; it’s used for allocating resources within these complexes.

Interest-bearing loans, in turn, probably originated in deals between the administrators and merchants who carried, say, the woollen goods produced in temple factories (which in the very earliest period were at least partly charitable enterprises, homes for orphans, refugees or disabled people for instance) and traded them to faraway lands for metal, timber, or lapis lazuli. The first markets form on the fringes of these complexes and appear to operate largely on credit, using the temples’ units of account. But this gave the merchants and temple administrators and other well-off types the opportunity to make consumer loans to farmers, and then, if say the harvest was bad, everybody would start falling into debt-traps.

This was the great social evil of antiquity – families would have to start pawning off their flocks, fields and before long, their wives and children would be taken off into debt peonage. Often people would start abandoning the cities entirely, joining semi-nomadic bands, threatening to come back in force and overturn the existing order entirely. Rulers would regularly conclude the only way to prevent complete social breakdown was to declare a clean slate or ‘washing of the tablets,’ they’d cancel all consumer debt and just start over. In fact, the first recorded word for ‘freedom’ in any human language is the Sumerian amargi, a word for debt-freedom, and by extension freedom more generally, which literally means ‘return to mother,’ since when they declared a clean slate, all the debt peons would get to go home.

Read more at http://www.nakedcapitalism.com/2011/08/what-is-debt-%E2%80%93-an-interview-with-economic-anthropologist-david-graeber.html#u7ST5cyWSXvSzioS.99

[-] 3 points by shadz66 (19985) 2 years ago

Many thanx for your wonderful comment (and post) 'flip'. Yes, I very recently purchased David Graeber's now rather famous, "Debt, The First 5000 Years" {ISBN : 978-1-61219-181-2} - but I have not started it yet - as I'm busy but perhaps mainly because it is so thick and intimidating, lol. Have you read it ?

I really enjoyed that read above & http://www.nakedcapitalism.com/ is indeed an excellent blog, which I hadn't visited in quite some time & I end by quoting J.K.Galbraith [1908-2006], who said :

  • “The study of money, above all other fields in economics, is one in which complexity is used to disguise truth or to evade truth, not to reveal it. The process by which banks create money is so simple the mind is repelled. With something so important a deeper mystery seems only decent.”

Thanx again for your continued contributions on these matters & lastly some (hopefully) useful links :

The first link is down at the time of posting and there is web-chatter that Teri Buhl has been hacked to keep her quite about a matter that she's currently investigating ( http://maxkeiser.com/2012/08/15/who-trying-silence-teri-buhl/ ) and she is making urgent attempts to transfer to a secure server apparently !!!

radix omnium malorum est cupiditas ...

[-] 3 points by flip (7484) 2 years ago

i have read the book - if you do i would suggest that you read the last two (maybe 3) chapters first then start at the beginning - i think it will make more sense - the first part is a long detailed recounting of the history of money - lots of anthropology! i will look into teri - i don't know her work but i think max is off base to some extent. thanks

[-] 3 points by shadz66 (19985) 2 years ago

Thank you for your advice which I think I will follow once I do start to read it. Yes, Max Keiser can be abrasive and a bit 'wack' sometimes but he is still far and away my favourite capitalist and he is a consistent critic and scourge of Bankster Feudalism and a vociferous proponent of 'G.I.A.B.O.' - "The Global Insurrection Against Bankster Occupation" !!

Here's a tribute to this - but be advised that tho' it features the voices of George Carlin, Max Keiser and Stacy Herbert - it is NOT for sensitive ears, lol : http://www.youtube.com/watch?v=pGRu1uqJGkY & ....

'Resistance Is Fertile' !!! ~:~

dum spiro, spero ...

[-] 3 points by flip (7484) 2 years ago

watched the video - it was great - i like the music but the bilderberg masononic references make me nervous - there is not conspiracy - it is all taking place right in front of our face - on the front page of newspapers and tought in the economic schools. ok, sorry and am ranting again - thanks for touching base. i was getting slammed by some economic nut jobs and feeling like there was no hope. keep at it - i have said all along that the beginning of the end of the vietnam war was the teach ins of the early sixties - we need to educate ourselves first then teach others what is happening and what can be done about it. thanks again.

[-] 3 points by shadz66 (19985) 2 years ago

"Bilderberg" is a Stone Cold Reality & they have their own Official Web-Site :

If they are not "conspiring" then I don't know what else it is that they're doing, lol. I know little about any Masonic Mumbo-Jumbo & I missed the references in that musical link I sent, so am going to look again now. However, like you - I thought that it was a cracking tune and very much shared the real sentiments therein. You too 'flip' ; stay well ; educate ; agitate ; organise & ...

SOLIDARITY !!

pax, amor et lux ...

[-] 3 points by flip (7484) 2 years ago

i do realize that the bilderberg group is a reality and they do sit around and make plans. what i do not agree with is that they or any of those groups change what happens in any significant way. the ruling class has certain interests and will conspire to move them forward at every turn. like the nobility of old planning how to put down a peasant revolt - that is not a conspiracy in the sense that most people think of it just straight forward class interests. i guess my point is that if the bilderbergs did not exist nothing would really change - the masonic reference was the eye in the pyramid - no biggie - thanks again - you were a refreshing change from richardgates and the other idiots that have been stalking me!

[-] 3 points by shadz66 (19985) 2 years ago

I agree and also disagree, lol. The 2008 Bilderberg attendee list does make for raised eyebrows to say the least, given what we know happened in The Fall (pun intended!) of that year, exactly 4 years ago now - with The Massive Larceny of 'Public Money' to save 'Private Banking Interests' !!

On your broader more expansive point - I agree. Fk what The 0.01% Oligarchs Conspire To Try To Effect - We, The 99% must - educate ; agitate ; organise - irrespective of Their Machinations !!!

SOLIDARITY ~*~

ad iudicium ...

[-] 3 points by flip (7484) 2 years ago

yes i agree - nothing is black and white - do you know about the trilateral commission - a more up front group do ing the same thing. clinton was one of their boys - here is chomsky (i shortened it - you can get the whole thing if you are interested) on their only publication - Excerpted from Radical Priorities, 1981 Perhaps the most striking feature of the new Administration is the role played in it by the Trilateral Commission. The mass media had little to say about this matter during the Presidential campaign -- in fact, the connection of the Carter group to the Commission was recently selected as "the best censored news story of 1976" -- and it has not received the attention that it might have since the Administration took office. All of the top positions in the government -- the office of President, Vice-President, Secretary of State, Defense and Treasury -- are held by members of the Trilateral Commission, and the National Security Advisor was its director. Many lesser officials also came from this group. It is rare for such an easily identified private group to play such a prominent role in an American Administration. The Trilateral Commission was founded at the initiative of David Rockefeller in 1973. Its members are drawn from the three components of the world of capitalist democracy: the United States, Western Europe, and Japan. Among them are the heads of major corporations and banks, partners in corporate law firms, Senators, Professors of international affairs -- the familiar mix in extra-governmental groupings. Along with the 1940s project of the Council on Foreign Relations (CFR), directed by a committed "trilateralist" and with numerous links to the Commission, the project constitutes the first major effort at global planning since the War-Peace Studies program of the CFR during World War II.

The Trilateral Commission has issued one major book-length report, namely, The Crisis of Democracy (Michel Crozier, Samuel Huntington, and Joji Watanuki, 1975). Given the intimate connections between the Commission and the Carter Administration, the study is worth careful attention, as an indication of the thinking that may well lie behind its domestic policies, as well as the policies undertaken in other industrial democracies in the coming years.

The Commission's report is concerned with the "governability of the democracies." Its American author, Samuel Huntington, was former chairman of the Department of Government at Harvard, and a government adviser. He is well-known for his ideas on how to destroy the rural revolution in Vietnam. He wrote in Foreign Affairs (1968) that "In an absent-minded way the United States in Vietnam may well have stumbled upon the answer to 'wars of national liberation.'" The answer is "forced-draft urbanization and modernization." Explaining this concept, he observes that if direct application of military force in the countryside "takes place on such a massive scale as to produce a massive migration from countryside to city" then the "Maoist-inspired rural revolution may be "undercut by the American-sponsored urban revolution." The Viet Cong, he wrote, is "a powerful force which cannot be dislodged from its constituency so long as the constituency continues to exist." Thus "in the immediate future" peace must "be based on accommodation" particularly since the US is unwilling to undertake the "expensive, time consuming and frustrating task" of ensuring that the constituency of the Viet Cong no longer exists (he was wrong about that, as the Nixon-Kissinger programs of rural massacre were to show). "Accommodation" as conceived by Huntington is a process whereby the Viet Cong "degenerate into the protest of a declining rural minority" while the regime imposed by US force maintains power. A year later, when it appeared that "urbanization" by military force was not succeeding and it seemed that the United States might be compelled to enter into negotiations with the NLF [National Liberation Front] (which he recognized to be "the most powerful purely political national organization"), Huntington, in a paper delivered before the AID-supported Council on Vietnamese Studies which he had headed, proposed various measures of political trickery and manipulation that might be used to achieve the domination of the U.S.-imposed government, though the discussants felt rather pessimistic about the prospects....

In short, Huntington is well-qualified to discourse on the problems of democracy.

The report argues that what is needed in the industrial democracies "is a greater degree of moderation in democracy" to overcome the "excess of democracy" of the past decade. "The effective operation of a democratic political system usually requires some measure of apathy and noninvolvement on the part of some individuals and groups." This recommendation recalls the analysis of Third World problems put forth by other political thinkers of the same persuasion, for example, Ithiel Pool (then chairman of the Department of Political Science at MIT), who explained some years ago that in Vietnam, the Congo, and the Dominican Republic, "order depends on somehow compelling newly mobilized strata to return to a measure of passivity and defeatism... At least temporarily the maintenance of order requires a lowering of newly acquired aspirations and levels of political activity." The Trilateral recommendations for the capitalist democracies are an application at home of the theories of "order" developed for subject societies of the Third World.

The problems affect all of the trilateral countries, but most significantly, the United States. As Huntington points out, "for a quarter century the United States was the hegemonic power in a system of world order" -- the Grand Area of the CFR [Council on Foreign Relations]. "A decline in the governability of democracy at home means a decline in the influence of democracy abroad." He does not elaborate on what this "influence" has been in practice, but ample testimony can be provided by survivors in Asia and Latin America.

As Huntington observes, "Truman had been able to govern the country with the cooperation of a relatively

[-] 3 points by shadz66 (19985) 2 years ago

The Trilateral Commission is also a Stone Cold Reality : http://www.trilateral.org/ .

I know of them but your Chomsky sourced comment despite its inopportune denouement, was brilliant. Samuel Huntington was an arch theoretician of The Would Be Overlords and has much to answer for, then, afterwards, now and in the hereafter.

Crypto-Straussians would treat all the 99.9% like mushrooms (Keep 'em in The Dark & feed 'em SH!T!).

We Are Being Played BUT ... Resistance Is Fertile !!!

per aspera ad astra ...

[-] 2 points by flip (7484) 2 years ago

well i didn't want to bore you

[-] 2 points by shadz66 (19985) 2 years ago

LOL & "The Facade of a Beloved and Legendary 'America'"

by William Blum.

fiat lux ...

[-] 1 points by flip (7484) 2 years ago

great article but man you are playing with fire putting up willaiim blum - he is a bit too crtiical of our beloved leader for some of the ows crowd - i have taken some serious heat for saying that it makes more sense to me to say that obama has been a huge disappointment but we must keep romney out at all costs. i can get on board with that argument (even though i will not vote for the man) but this "he is wonderful" stuff leaves me wondering what people are doing here.

[-] 3 points by shadz66 (19985) 2 years ago

LOL again & "shilling" is what they are doing & we the befuddled, perplexed & confused needn't get too vexed - because we still ain't fooled, right ? lol !

In a nut shell : OF COURSE 'Voting Obomber' ain't no panacea or solution to anything at all but for anyone remotely left / liberal / progressive who wants to vote for POTUS in 2 months time - wtf is the option ? It's like talking loudly about wiping one's ass after a trip to the loo at a dinner party - NOT a nice subject for conversation but what was the option but to do so ? Ohbummer ! Lol !!

That's the sad, honest truth as I see it & The Real Struggle Comes After November !!!

Re. 'William Blum', I like him & http://vho.org/aaargh/fran/livres8/BLUMkillinghope.pdf ;-)

verum ex absurdo ...

[-] 2 points by flip (7484) 2 years ago

will check it out for sure

[-] 2 points by shadz66 (19985) 2 years ago

Cool and for something a touch more gentler on the eardrums yet no less true :

spero meliora ...

[-] 1 points by geo (2638) from Concord, NC 2 years ago

Commercial banks don't build credit... they create debt under the disguise of credit.

[-] 2 points by flip (7484) 2 years ago

"And commercial banks create credit" - are you saying something different

[-] 1 points by geo (2638) from Concord, NC 2 years ago

Yes. I'll copy and paste to save time as I posted this lower down:

"Right. Lets make this very simple:

Jack has $10 that he deposits in the bank in a savings account. Under Fed rules lets say that there is a 10% reserve that is needed by the bank.

The bank loans out $9 dollars and Jack is left with $1 in the bank cash. He may think he has $10 there but that is illusion, he has $1 dollar on hand.

The assumption is made that the credit loaned out will get paid back. That is an assumption, and as we have all learned in the last few years, depending on the banks due diligence in lending, it may be true or it may be false.

Proof that there is no money but created debt in the banks is when everyone gets scared and tries to withdraw their money at once.... a run on the bank. Banks fold..... unless cash is injected by the Fed Resrv... which is created cash, or cash withheld by the Fed when a member bank joins.

There is nothing real but floating debt out there."

[-] 2 points by flip (7484) 2 years ago

well if you are saying that all money is debt - an iou then we agree. i know all about fractional reserve lending. what these people are talking about is a different paradigm - one that would free us from the bond vigilanties and the rentiers. it is obvious on its face what they are saying but most people are brainwashed by the economics profession. it is not a science but an ideological profession

[-] 1 points by geo (2638) from Concord, NC 2 years ago

I don't believe that all money is debt, not even fiat. Fractional Reserve Banking most definitely creates debt that is due to be paid back. Government spending does not within our current monetary system.

From above:

"Banks do not lend to bring new capital investment into existence. They lend against mortgages, against capital in place, against real estate, against assets that already exist—not to create new assets."

.... in other words debt creation.

[-] 2 points by flip (7484) 2 years ago

sorry i cannot waste any more time on you

[-] 1 points by geo (2638) from Concord, NC 2 years ago

Before you so flippantly dismiss me Flip, maybe you should read up on Modern Monetary Theory (MMT).

[-] 2 points by flip (7484) 2 years ago

i have and i like it - very simple and obvious to all. what do you think kelton is pushing - not sure why you are telling me this

[-] 1 points by MattLHolck (16833) from San Diego, CA 2 years ago

if bank loans out credit,

can that "credit" be deposited in the bank and loaned out again?

[-] 1 points by DKAtoday (22349) from Coon Rapids, MN 2 years ago

Only if you are the bank. They used to call it ( back in the olden days ) - counting your chickens before the eggs are hatched.

[-] 1 points by geo (2638) from Concord, NC 2 years ago

You forget to subtract the debt thats created with each loan.

[-] 1 points by MattLHolck (16833) from San Diego, CA 2 years ago

those debts are owed to the bank

[-] 1 points by geo (2638) from Concord, NC 2 years ago

Right. Lets make this very simple:

Jack has $10 that he deposits in the bank in a savings account. Under Fed rules lets say that there is a 10% reserve that is needed by the bank.

The bank loans out $9 dollars and Jack is left with $1 in the bank cash. He may think he has $10 there but that is illusion, he has $1 dollar on hand.

The assumption is made that the credit loaned out will get paid back. That is an assumption, and as we have all learned in the last few years, depending on the banks due diligence in lending, it may be true or it may be false.

Proof that there is no money but created debt in the banks is when everyone gets scared and tries to withdraw their money at once.... a run on the bank. Banks fold..... unless cash is injected by the Fed Resrv... which is created cash, or cash withheld by the Fed when a member bank joins.

There is nothing real but floating debt out there.

[-] 1 points by MattLHolck (16833) from San Diego, CA 2 years ago

the "$10" loaned out is deposited into another bank

which in turn loans out that money ?

[-] 1 points by geo (2638) from Concord, NC 2 years ago

The $9 ($10 - $1<reserve>= $9) can be deposited in another bank and loaned out. Now you have two tiers of debt. That $9 has to be paid back to the original lending bank, plus new debt attached to the $9 being lent out again. Again, all contingent on the assumption that the debt will be paid back.

Repeat this process many times and there is a whole lot of debt that has been created with very little real cash involved.... a 9 to 1 ratio of debt to savings, not counting interest payments which goes directly to the banks.

[-] 1 points by MattLHolck (16833) from San Diego, CA 2 years ago

are these debt chains allowed to propagate ?

[-] 1 points by geo (2638) from Concord, NC 2 years ago

They are encouraged to. My original premise, commercial banks are in the business of creating debt. The majority of their products that produce income for them are debt instruments... from credit cards, to car loans, mortgages, and all of these come in various flavors to soak the most fees and interest from the consumer. He is not encouraged to save. Interest rates on savings are at an all time low.

[-] 1 points by MattLHolck (16833) from San Diego, CA 2 years ago

interest is taxing

[-] 1 points by geo (2638) from Concord, NC 2 years ago

So are fees. The industry made roughly $30 billion a year in insufficient funds fees when they were playing around with the order that charges were processed vs. check deposits for the poorest people just last fall.

[-] 1 points by MattLHolck (16833) from San Diego, CA 2 years ago

yep my bank account over drafted

[-] 0 points by Archimedes (6) from Siracusa, Sicily 2 years ago

The man behind the curtain is the one tasked with figuring out how to cost effectively deceive the public. Those outside the curtain are themselves slaves to the corruption, tasked with carrying out the deceit.

[-] 1 points by timirninja (263) 2 years ago

if build sand bank on the beach its gonna have sand dollars. say it!

[-] 2 points by flip (7484) 2 years ago

are you a ron paulie gold standard fool? do you understand what is being said - does this history of virginia help you? "James City County was one of the original eight shires, or counties, enumerated in 1634.The sheriff was "the most powerful and the best paid of any county official in colonial times." Among his many duties, he collected the taxes, which were paid in tobacco, took custody of it and paid the county expenses as directed by.....

[-] 1 points by timirninja (263) 2 years ago

interesting how simple joke bounced back with wild west sheriffs, taxes and death. if you start thinking wisely you might understand how government debt affect future generation. sooner you fall sooner you will rise up and flourish.

[-] 1 points by flip (7484) 2 years ago

did you respond to me and have it removed? who would remove it and what silly thing did you say to cause that? silly ninja you speak the same language as faraujo - how odd - you seem to think the same also which is even more odd since it is not really thinking - more like what a dog does when it licks itself. well you are flourishing so no need to worry - just be careful where you lick

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[-] 1 points by flip (7484) 2 years ago

tobacco as money - get it - no, too stupid. glad to hear you are flourishing - brings to mind nassem taleb's idea - "if you're so rich why aren't you so smart!"

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[-] 2 points by flip (7484) 2 years ago

you are making my point - we do not seem to speak the same language - sorry - you are speaking econ 101 - hudson is on a different subject - read some of the long posts that i send you - max neef and hudson and the woman say it better than i could. sorry i cannot be distilled to a phrase - or maybe it could - bury money in bottles!

[-] 1 points by richardkentgates (3269) from Fort Walton Beach, FL 2 years ago

Such is the nature of text based communication. I have no need to read the interpretations of the facts by other people. I look at the facts, the mechanisms, and I am perfectly capable of making my own determinations. Maybe if you lay of the need to speak by proxy of other people's understanding, we could communicate directly.

[-] 2 points by flip (7484) 2 years ago

not sure exacty what you mean - but you do need others interpretation and so do i. the facts alone will not do the whole trick. read chomsky and tell me that he did not open your eyes to a new interpretation of facts. i know we mostly want the same thing and it is frustrating that we talk past each other. i do not have time to slog away for hours and read about concepts that i have been done with for years. i am sorry about that but my time is limited.

[-] 1 points by richardkentgates (3269) from Fort Walton Beach, FL 2 years ago

I have watched many hours of Chomsky, and read some of his stuff. It's not revolutionary. For the most part, it's one long sales pitch for socialism. I'm not anti socialism but it's hardly revolutionary or enlightening.

[-] 2 points by flip (7484) 2 years ago

again we disagree - not sure what you watched but we see different things - i don't want to annoy you more than i have so i will say good night - keep an open mind

[-] 1 points by MattLHolck (16833) from San Diego, CA 2 years ago

depends what one already knows

[-] 1 points by richardkentgates (3269) from Fort Walton Beach, FL 2 years ago
  1. The FED does make a profit. I'll let you explain how this happens.

  2. Not all new money goes to government. Two examples are Operation Twist, and Quantitative Easing.

  3. Consumer prices have risen. Not sure how you get to flat prices and high inflation at the same time. Simply measuring debt is not an indicator of inflation. Overall inflation and Core inflation are viewed through the scope of price indexes.

[-] 2 points by flip (7484) 2 years ago

you are missing his point. this is part of a long conference so maybe checking out the whole thing would help you. the whole story of economics is mostly wrong - maybe you would like max neef - AMY GOODMAN: What do you think we need to change?

MANFRED MAX-NEEF: Oh, almost everything. We are simply, dramatically stupid. We act systematically against the evidences we have. We know everything that should not be done. There’s nobody that doesn’t know that. Particularly the big politicians know exactly what should not be done. Yet they do it. After what happened since October 2008, I mean, elementally, you would think what? That now they’re going to change. I mean, they see that the model is not working. The model is even poisonous, you know? Dramatically poisonous. And what is the result, and what happened in the last meeting of the European Union? They are more fundamentalist now than before. So, the only thing you know that you can be sure of, that the next crisis is coming, and it will be twice as much as this one. And for that one, there won’t be enough money anymore. So that will be it. And that is the consequence of systematical human stupidity.

AMY GOODMAN: So, to avoid another catastrophe, collision, if you were in charge, what would you say has to happen?

MANFRED MAX-NEEF: First of all, we need cultured economists again, who know the history, where they come from, how the ideas originated, who did what, and so on and so on; second, an economics now that understands itself very clearly as a subsystem of a larger system that is finite, the biosphere, hence economic growth as an impossibility; and third, a system that understands that it cannot function without the seriousness of ecosystems. And economists know nothing about ecosystems. They don’t know nothing about thermodynamics, you know, nothing about biodiversity or anything. I mean, they are totally ignorant in that respect. And I don’t see what harm it would do, you know, to an economist to know that if the bees would disappear, he would disappear as well, because there wouldn’t be food anymore. But he doesn’t know that, you know, that we depend absolutely from nature. But for these economists we have, nature is a subsystem of the economy. I mean, it’s absolutely crazy.

And then, in addition, you know, bring consumption closer to production. I live in the south of Chile, in the deep south. And that area is a fantastic area, you know, in milk products and what have you. Top. Technologically, like the maximum, you know? I was, a few months ago, in a hotel, and there in the south, for breakfast, and there are these little butter things, you know? I get one, and it’s butter from New Zealand. I mean, if that isn’t crazy, you know? And why? Because economists don’t know how to calculate really costs, you know? To bring butter from 20,000 kilometers to a place where you make the best butter, under the argument that it was cheaper, is a colossal stupidity, because they don’t take into consideration what is the impact of 20,000 kilometers of transport? What is the impact on the environment of that transportation, you know, and all those things? And in addition, I mean, it’s cheaper because it’s subsidized. So it’s clearly a case in which the prices never tell the truth. It’s all tricks, you know? And those tricks do colossal harms. And if you bring consumption closer to production, you will eat better, you will have better food, you know, and everything. You will know where it comes from. You may even know the person who produces it. You humanize this thing, you know? But the way the economists practice today is totally dehumanized.

[-] 1 points by richardkentgates (3269) from Fort Walton Beach, FL 2 years ago

I agree with a lot of that but what is left out is the reality. Academia alone is flaccid. High minded thought is fine, if it can be applied. You have to bridge the gap between these lofty goals and the current reality. If the butter can be made at slave wages, of course it's cheaper to transport it.

Lets say, in the economic biosphere, a company is contracted to sequester carbon dioxide in order to save the planet, at a fee. People are employed with that company to sequester carbon dioxide. Then the employees buy food with that and they collect carbon dioxide from breathing so they can then feed the trees.

No, it doesn't make sense to the trees. But to the guy making a profit from sequestering the carbon dioxide, it makes perfect since because you and I believe people and trees will die without the sequestration company because then how would we obtain the food to keep us alive and provide carbon dioxide to the trees.

So yeah, it's fucked up. Understanding the mechanisms in which the misconceptions thrive is key. You have to figure it out, make it easy to understand, and collectively call the system to answer for it.

Just providing an alternative view will not get it done. Just a few people clamoring about it will not get it done.

[-] 2 points by flip (7484) 2 years ago

i really do not understand what you are trying to tell me. undestanding the economic system is the key to fixing what is happening. freeing ourselves from the neoclassical economic theory that has helped the rulers maintain control is the biggest step seems to me. not sure if you read this one but they are part of the same conference - this is the punch line - “The government, when it issues its own currency, and goes into debt in that currency can always pay its debt, can never go broke, can never run out of money. It can afford anything that is for sale in that currency. It doesn’t need to borrow its own currency. And it can set its own interest rate. It does not have to pay what markets want. It does not become a victim to speculation, to bond vigilantes. It has additional policy space. It can do things for its economy and for its people that a government that does not have a sovereign currency cannot do." - if you want to read more here it is but i think she said all you need to know - the same story keynes was telling with his money in bottles - (c. 5:22) “So, let’s begin with the first lesson. What is money? All money exists as an IOU. It’s a debt. When we say, ‘I owe you,’ we mean two people are involved in every monetary relationship. The ‘I’ is the debtor. The ‘U’ is the creditor. I Owe You. IOUs are recorded in what we call the money of account. The money of account in Australia is the Australian dollar. The money of account in the U.S., the U.S. dollar. The money of account in Japan, the Japanese Yen. In Britain, the British pound. In Italy, the Euro. Do you see a difference? You will by the end of this talk.

(c. 6:21) “The money of account is something abstract, like a metre, a kilogram, a hectare. It’s not something you can touch or feel. It’s representational, something only a human could imagine. In any modern nation the money of account is chosen by the national government. MMT emphasises the state’s power over money. This is not something new. It dates back as far as Aristotle. You can find it in Adam Smith and in the work of John Maynard Keynes. I will read a brief quote from Keynes who said:

“‘The age of chartalist, or state money, was reached when the State claimed the right to declare what thing should answer as money of account. Today, all civilised money is, beyond the possibility of dispute, chartalist’—state money.

“A sovereign government defines the money of account. A sovereign government imposes taxes, fees, and other obligations to be paid to be paid to the state. A sovereign government decides what it will accept in payment to itself. And sovereign government chooses how it will make its own payments to others. Most governments in the world today choose their own unique money of account. And they issue their own unique currency. One nation, one money, is the rule in almost every corner of the world today. U.S. dollars, bills and coins. Mexican pesos, bills and coins. British pounds, notes and coins. Most governments also require that taxes be paid in a currency that the state has the exclusive power to issue. These currencies are sovereign money.

(c. 8:50) “As long as the state has the power to enforce its tax laws, the people will need the government’s money. The currency will have value. People will work to sell things—goods and services—to the government in order to get government money. Whatever the government accepts in payment to itself becomes the ultimate, ‘definitive,’ money in the economy. It is the only way to settle a debt. You must use government money. We can imagine in any economy a hierarchy of money. But not all money is created equal. The most acceptable money sits at the top of the pyramid. Those are the IOUs that everyone accepts and everyone must accept. Those are the IOUs that are ultimately needed to pay our debts. Those are the government’s IOUs. The rest of us can go in debt, issue IOUs, but our debt is not as good as government debt. It’s not as acceptable. It can’t be used to pay for things.

(c. 10:25) “In the U.S., the hierarchy looks like this: The government’s IOU—the United States dollar—sits at the top of the pyramid. It is a fiat currency. The United States government is the monopoly issuer of the U.S. dollar—the only entity on the planet that can legally create the currency. The U.S. government taxes in dollars. It spends in dollars. And it controls its own currency. Why is this important? What are the benefits of issuing your own currency? They are extraordinary.

(c. 11:19) “The government, when it issues its own currency, and goes into debt in that currency can always pay its debt, can never go broke, can never run out of money. It can afford anything that is for sale in that currency. It doesn’t need to borrow its own currency. And it can set its own interest rate. It does not have to pay what markets want. It does not become a victim to speculation, to bond vigilantes. It has additional policy space. It can do things for its economy and for its people that a government that does not have a sovereign currency cannot do.

(c. 12:18) “Think about what the hierarchy would look like under a gold standard. Many governments operated under gold or silver or both for some period of time in our world history. Under a gold standard, the government promises to convert its currency into gold. In that situation, what sits at the top of the pyramid is not the state’s currency, but the gold reserves. This means that the government must be careful about how much it spends. If it spends too much of its own currency, it can jeopardise the entire system because it may not be able to convert currency into gold as promised. You have to limit your spending and limit what you do with your policies. Governments operating under a gold standard do not have sovereign currency.

(c. 13:24) “In a similar way, a country that fixes its exchange rate to another country’s currency the way Argentina and Russia and others have done do not issue a sovereign currency. They must be careful about how much they spend. They must defend the reserves. If you promise to convert your currency into another country’s currency, you might go broke. You can run out. How do you get the other country’s currency? It requires trade surpluses to earn the other country’s currency. You become dependent on the rest of the world and their economic wellbeing to sustain your own wellbeing. The hierarchy in a country that operates fixed exchange rates places someone else’s currency at the top. You also lose control of your interest rate—something that’s crucial to retain control of—if a country is going to have a sustainable debt and full employment.”

[-] 1 points by richardkentgates (3269) from Fort Walton Beach, FL 2 years ago

Ok. Let me try another way. It is not possible to educate the entire public on economics. Not at this time. However, you need the majority of the population educated on the key factors so as to create a sustainable narrative to push with. How do you get the narrative set and the people behind you without them all needing a degree in economics?

Web designers have this problem. They assume the client knows what they know and as a result, they offer over complicated products. Companies that simplify it for general consumption are the ones who make the lions share of profit in that industry.

  1. What are the key factors?

  2. How can you simplify it for general consumption?

Once you figure that out, people will tend toward the narrative on their own if you have done it in a way that appeals to the masses. It's awesome that you're smart. Your intelligence though only has so much reach by itself. Use it to forge tools that reach further.

[-] 2 points by flip (7484) 2 years ago

i know you are not surprised but i disagree. i think the story is simple enough for anyone to understand. the profession of economics has made it complicated to confuse people. keynes story of money in bottles puts the lie to the whole thing. you really don't need to know more than that. when i read it to my wife she understood right away. understanding that a government is not a busness or a household makes it easy. the printing press changes the whole story. i could go on but i doubt there is any point. you seem to be stuck in neoclassical economics and max neef and hudson are talking about a whole new paradigm

[-] 1 points by richardkentgates (3269) from Fort Walton Beach, FL 2 years ago

I'm not even talking about economics. I'm talking about your delivery. You're long winded and repetitive. You cannot see my argument because you have an expected outcome and preconceived notion of motive. You're over complicating the conversation.

Are you writing a book report or having a conversation? You seem to be trying to do both.

Movements require person to person communication. Work on that. Figure out the key points, and use that at a starting point. Then allow the other person to guide you to the next steps. As it is now, you have everything laid out like a map and you require the other person to follow a ridged line to absolute agreement or disagreement. Then when they disagree you repeat yourself or cover the same points as to set them back on your predetermined path. There is all very pointless. Like a male child demanding other children play the way he thinks they should, eventually he plays alone.

[-] 2 points by flip (7484) 2 years ago

thanks for the advice but i think the problem is more you than me. is that how you do it - we have tried to converse before and you seem to make the conversation more confused. this was your first comment - 1.The FED does make a profit. I'll let you explain how this happens - as i said you missed the point entirely. so i am sorry this is not helping you - some seem to get it

[-] 1 points by richardkentgates (3269) from Fort Walton Beach, FL 2 years ago

The point is that you made a mistake by saying the FED doesn't make money. That was my initial point. Then I followed your lead into academic blather. I followed you and discussed every point you offered, starting at the original post. Do you really not comprehend the natural flow of conversation? I bet you're real fun at parties.

[-] 2 points by flip (7484) 2 years ago

from the ny times - In 1914, not long after the Ford Motor Company came out with the Model T, Ford made the startling announcement that he would pay his workers the unheard-of wage of $5 a day. - $5 a day - so huge inflation from 1910 to 1980 and yet a much richer country - and richer working class - that does not fit your theory!

[-] 1 points by richardkentgates (3269) from Fort Walton Beach, FL 2 years ago

If wages are the cause of inflation, obviously wages are keeping pace with inflation. How does the printing of money by the FED helping wages to keep pace with inflation?

I hope you aren't a student, I would expel you for arrogant stupidity.

[-] 2 points by flip (7484) 2 years ago

you did not respond to the point (surprise you never do) - your thinking (if that is what you call it) is that inflation is a bad thing - correct? i am pointing out that we have had huge inflation and at the same time rising wealth and a rising standard of living - now you have to explain that - if that was your attempt then ok but i don't think it works. here is how some on this site respond - 2 points by PublicCurrency (1160) 1 hour ago

Nobel Laureate Milton Friedman, one of the most influential economists of the 20th century, on the single cause of severe economic depressions:

“I know of no severe depression, in any country or any time, that was not accompanied by a sharp decline in the stock of money, and equally of no sharp decline in the stock of money that was not accompanied by a severe depression.”

Even Investors Business Daily articles have claimed that deflation is much more destructive than inflation.

Currently, even though the money supply is rapidly increasing, it is not getting into the productive sector - reasonable and to the point - you might try it some time - i hope you are not a teacher - you suck at it!

[-] 1 points by richardkentgates (3269) from Fort Walton Beach, FL 2 years ago

You don't have a point. You have a fluid argument that changes when you need it to or you rant about nothing then say everyone isn't responding to your nothing statements.

[-] 3 points by flip (7484) 2 years ago

i have a simple point that you cannot grasp ricky - not sure why but you can't - inflation redistributes wealth (for the most part) and deflation concentrates it - just as mr publiccurrency points out. now you think inflation steals the wealth of the working class and deflation would be good for them - dead on backwards as any good texas farmer from 1890 would know. should we give up or do you like this dance

[-] 1 points by flip (7484) 2 years ago

when did i say the fed doesn't make money - again you are making my point - the post is about something completely different that you cannot seem to grasp. rant about the fed all you want - i have bigger fish to fry - on that note my wife has dinner ready!

[-] 1 points by richardkentgates (3269) from Fort Walton Beach, FL 2 years ago

Good deal. I'll reread.

[-] 0 points by Faraujo (-4) 2 years ago

Whoever wrote this obviously doesn't know about Weimar Germany who could not keep printing money to buy goods because its own people eventually would not accept the paper.

[-] 2 points by flip (7484) 2 years ago

wrong again speedo - read his book - "super imperialism" - he knows all to much about weimar germany. read it then let me know what you think

[-] 1 points by Faraujo (-4) 2 years ago

Nice name calling. So his thesis is incorrect. Nations can't just print mone.

[-] 2 points by flip (7484) 2 years ago

they always have and always will - read super imperialism - educate yourself - speedo

[-] 1 points by Faraujo (-4) 2 years ago

Just like your mentor, Obama, resort to bullying tactics and name calling when the argument doesn't go your way.

[-] 2 points by flip (7484) 2 years ago

boy are you stupid speedo. sorry to bully you little boy but read something - and just so you know - i didn't vote for him before because i knew what he was (so did nader, and chomsky and others - look it up - oh, sorry i forgot - you don't read) - i will not vote for him this time - you will vote for that little liar mr ryan?

[-] 1 points by Faraujo (-4) 2 years ago

I am the stupid one who has to resort to bullying tactics and name calling?

Your boys don't know their economics and that is why the nations of the world don't listen to them. The court of public opinion has already ruled against you and your crazy thinking...SCOREBOARD!!!!

[-] 2 points by flip (7484) 2 years ago

well there is a strong argument for your side - the rulers don't like the idea so it cannot be a good one - and you are on an ows site saying this! are you sure you are in the right place? do you know how to make an argument - bring forth evidence and put together a conclusion? do you, because this is not a good one. as a matter of fact it is a really bad one!

[-] 1 points by Faraujo (-4) 2 years ago

Nations cannot print money to infinity without consequences. Germany is just one example.

[-] 1 points by notaneoliberal (2269) 2 years ago

Commodity prices stable? Real estate up? What planet is this from?

[-] 2 points by flip (7484) 2 years ago

i think his time frame is longer than yours but you must have missed the essential points of the talk. commodities are going into a super cycle because of resource scarcity - nothing at all to do with money printing or inflation. look to jeremy grantham if you want more info on that subject "time to wake up investors" is a good start. as to real estate - my house is slightly below the high point of 2007 but way above the price of 1960. the recent housing bubble had more to do with greenspan's silly idea of saving the system than long term inflation. but go back to the main point about the different banks and then look up how governments that print in their own currency cannot go broke.

[-] 1 points by notaneoliberal (2269) 2 years ago

Ok. Fair enough, but this info seem a little dated Gradual inflation has gone on since way before 1960. I understand how , theoretically, governments that print their own money can't go broke. I agree about the resource scarcity issue, at least with respect to oil. The stock market is flat. It has never regained the 2008 level. With the modest level of inflation we've had since then it has dropped significantly. Not sure of the term "super cycle", but I don't think commodity prices are in a cycle, per se, but on a steady incline overall,(particularly oil).

[-] 2 points by flip (7484) 2 years ago

if you read grantham i think you will find it interesting. he is talking about investing for your retirement etc but most commodities are in a peak phase - at least from the point of view of the easy to get stuff. the gulf spill is just one example. the stock market went into and 18 yr bull market in 1982 and is fairly flat since then. i am not sure but i think he is talking about very long term stuff - 50 and 100 yrs. i feel that this is the main issue we need to understand since the economists are running the economy and the economy runs our lives. not much fun being able to vote but having no job. i know very well since my wife was out of work for 2yrs - and she is in the hedge fund business!

[-] 1 points by Faraujo (-4) 2 years ago

GMO is talkIng about a real price increase in commodities due to emerging markets not a nominal price increase due to excess paper. He had been saying this since 1980 as has Rogers.

[-] 2 points by flip (7484) 2 years ago

yes, but to my understanding grantham is a bit late to the party - rogers is another story. either way it seems to me that we are running out of all the things that we need to run a modern society

[-] 1 points by Faraujo (-4) 2 years ago

You are forgetting about the substitution effect that always occurs to blunt shortages. We have relearned it in the energy space as cracking has completely changed the premise that we are running out of oil.

[-] 2 points by flip (7484) 2 years ago

do a bit more reading on fracking - it is not what it is cracked up to be - no pun intended. depletion rates are very high. do you know the numbers - how many barrels of oil we use each day! and do you know how perfect a fuel it is. can be transported and stored in barrels for years - a barrel will do the work of 12 men working for one year - try to replace that! if you think we will run 150 million cars on natural gas you are not thinking. i am hoping they come up with a tech fix but i am not betting on it. it is a bad bet!

[-] 1 points by Faraujo (-4) 2 years ago

Nat gas is a great short term solution until alternatives can be found. Already nuclear is becoming much safer. Solar and wind are probably at least 50-60 years away so we need something in the meantime.

[-] 2 points by flip (7484) 2 years ago

are you aware of the coming water problems - and do you know how much water fracking uses? your car run on natural gas? who is going to pay to convert them all - as i said you can wish and hope all you want - if you are wrong we are done. i am hoping you are right but planning on you being wrong - dead wrong. i don't think you have read enough about this but think what you want - don't try to convince me. i have studied it more than you. read grantham "time to wake up investors" or leeb "game over" and then respond to me

[-] -1 points by Faraujo (-4) 2 years ago

LIsten jokester, I don't need to tread Grantham as I talk to him and the others from GMO. He is saying that there will be a commodity shortage due to growing populations. That is a real price increase not a nominal price increase due to monetary factors.

Fracking is not flawless and has its problems but it is a solution whereas solar and wind are not. Nuclear will probably be the ultimate solution.

Get off your high horse and be careful what you say as you have no idea who you are speaking to.

[-] 2 points by flip (7484) 2 years ago

"Get off your high horse and be careful what you say as you have no idea who you are speaking to" - oh my god - i am so sorry your highness. too bad but you do not know what you are saying - oh, let me get off my horse first, maybe you can't hear me from up here. no you don't need to read anything that refutes your argument - especially if they lay out the facts clearly and simply - that would force you to change your mind or maybe lose your mind - you have already speedo -now get on your horse and get out of here - you don't know who you are talking to!

[-] -1 points by Faraujo (-4) 2 years ago

I am speaking to somebody with a pseudonym of Flip who has obviously not studied economics and reads GMO on the web and resorts to name calling and bullying when he can't get his point across. Economics is as old as human kind and we didn't just learn the precepts. So wake up and realize that socialism doesn't work. And you can't print money without recourse, no matter what two bit economist says.

[-] 2 points by flip (7484) 2 years ago

why would you think it is a pseudonym? well you have studied economics which is why you cannot see the obvious. you cannot see resource scarcity coming but you can see that technology will save us like it has in the past. ok, keep your head in the sand and see how it works out for you. read "debt the first 5000 years" then tell me about economics - can you read - seems you missed the obvious truth of the post.

[-] 1 points by DKAtoday (22349) from Coon Rapids, MN 2 years ago

I knew a guy back in jr high - his name was Mike Flip.

[-] -1 points by Faraujo (-4) 2 years ago

So we have never had resource scarcity in the past?

That the beauty of the free market system, price allocates the resources to the best use.

[-] 0 points by Mooks (1985) 2 years ago

Haha what a clown. The sad part is actually agree with some of the stuff you say. It is too bad you come across as such a tool.

[-] 1 points by notaneoliberal (2269) 2 years ago

Cracking? Do you mean "Fracking"? One should not confuse "peak oil" with "running out of oil". Currently, there is no viable substitute for oil in the transportation sector.

[-] 0 points by Faraujo (-4) 2 years ago

Fracking works for oil as well as natural gas. It just doesn't have the production yet that gas has. We will be able to substitute nat gas for coal and heating oil.

[-] 0 points by notaneoliberal (2269) 2 years ago

So yo did mean Fracking, I guess.Yes,the nat. gas for coal and heating oil is already happening pretty fast. This, of course does nothing for the issue of transportation fuel.

[-] 1 points by notaneoliberal (2269) 2 years ago

Grantham (just read some of his work} seems to be one a very few in that realm who seems to "get it".

[-] 2 points by flip (7484) 2 years ago

not sure what you read but i think he is correct about what is happening. stephen leeb is another investment guy who is writing books to try to get our leaders to wake up. he wants the government to make plans for the coming shortages. then there are all sorts of peak oil people - james howard kuntsler is pretty crazy but fun? the transition movement in the uk seems to be doing some very good things. http://www.transitionnetwork.org/ is interesting. i am planning on buying land in western ny - it is cheap and i want to own trees and a wood stove. not sure when we are going to find ourselves in a world that doesn't have enough cheap energy but it will happen.

[-] 1 points by notaneoliberal (2269) 2 years ago

Already a CFN fan. I read this. http://www.gmo.com/websitecontent/GMOQ2Letter.pdf I noticed Grantham mentioned "Limits to Growth". I suspect you may already be familiar. Also Heinbergs' "The End of Growth" is quite enlightening.

[-] 2 points by flip (7484) 2 years ago

do you know max neef - he is great i think. here is a snippet - the whole interivew is very good - AMY GOODMAN: What do you think we need to change?

MANFRED MAX-NEEF: Oh, almost everything. We are simply, dramatically stupid. We act systematically against the evidences we have. We know everything that should not be done. There’s nobody that doesn’t know that. Particularly the big politicians know exactly what should not be done. Yet they do it. After what happened since October 2008, I mean, elementally, you would think what? That now they’re going to change. I mean, they see that the model is not working. The model is even poisonous, you know? Dramatically poisonous. And what is the result, and what happened in the last meeting of the European Union? They are more fundamentalist now than before. So, the only thing you know that you can be sure of, that the next crisis is coming, and it will be twice as much as this one. And for that one, there won’t be enough money anymore. So that will be it. And that is the consequence of systematical human stupidity.

AMY GOODMAN: So, to avoid another catastrophe, collision, if you were in charge, what would you say has to happen?

MANFRED MAX-NEEF: First of all, we need cultured economists again, who know the history, where they come from, how the ideas originated, who did what, and so on and so on; second, an economics now that understands itself very clearly as a subsystem of a larger system that is finite, the biosphere, hence economic growth as an impossibility; and third, a system that understands that it cannot function without the seriousness of ecosystems. And economists know nothing about ecosystems. They don’t know nothing about thermodynamics, you know, nothing about biodiversity or anything. I mean, they are totally ignorant in that respect. And I don’t see what harm it would do, you know, to an economist to know that if the bees would disappear, he would disappear as well, because there wouldn’t be food anymore. But he doesn’t know that, you know, that we depend absolutely from nature. But for these economists we have, nature is a subsystem of the economy. I mean, it’s absolutely crazy.

And then, in addition, you know, bring consumption closer to production. I live in the south of Chile, in the deep south. And that area is a fantastic area, you know, in milk products and what have you. Top. Technologically, like the maximum, you know? I was, a few months ago, in a hotel, and there in the south, for breakfast, and there are these little butter things, you know? I get one, and it’s butter from New Zealand. I mean, if that isn’t crazy, you know? And why? Because economists don’t know how to calculate really costs, you know? To bring butter from 20,000 kilometers to a place where you make the best butter, under the argument that it was cheaper, is a colossal stupidity, because they don’t take into consideration what is the impact of 20,000 kilometers of transport? What is the impact on the environment of that transportation, you know, and all those things? And in addition, I mean, it’s cheaper because it’s subsidized. So it’s clearly a case in which the prices never tell the truth. It’s all tricks, you know? And those tricks do colossal harms. And if you bring consumption closer to production, you will eat better, you will have better food, you know, and everything. You will know where it comes from. You may even know the person who produces it. You humanize this thing, you know? But the way the economists practice today is totally dehumanized.

[-] 2 points by flip (7484) 2 years ago

don't know what cfn is. the end of growth looks interesting but they have all seen the same thing coming. doesn't look like our society - government or business class can get us out of the way of this process. it is going to get ugly one of these days - rolling brown outs and food shortages - is that what you are thinking?

[-] 1 points by notaneoliberal (2269) 2 years ago

CFN-Clusterfuck Nation, James Kunstlers website. Its hard to say what will happen first. Yes, I can foresee food shortages. The electrical grid may hold up for a while, but who knows. I think it will be oil that will be the first to become critical. In fact, we already have a situation where in spite of decline in demand, prices are trending up. With the way our food delivery system is constructed, we may see empty grocery store shelves. I'm among those who think that the 2007 oil spike was the straw that broke the economic camels back. My advice for you. Stock up on superphosphate.

[-] 2 points by flip (7484) 2 years ago

and what will superphosphate do for me - tell me more i am very interetsed. as i said we hope to get some land in western ny - small walkable town - will have the ability to grow some food and heat my house - just in case and a fall back position for my children and grandchildren. maybe a personable windmill or solar panels depending on how much money we have - a roof water system would be a nice setup to put into place! any thinking about time frame? imagine if they change course and get europe going and ramp up jobs in this country - we will see it blow up again pretty fast i think - and you?

[-] 1 points by notaneoliberal (2269) 2 years ago

That is why I mentioned superphosphate. (your ambition to grow your own food). Grantham covered this to a certain extent.; I am in the ornamental horticulture business and have seen a tremendous spike in the price of this stuff. This is the primary form of phosphate that is used in commercial fertilizers. It is one of the 3 "primary nutrients" and as Grantham rightly points out below, "cannot be made or substituted for".-This from "Welcome to Dystopia- "Potential fertilizer crisis and possible organic solution The risk of phosphate and potash fertilizer running out is the one area in our report of last year that has improved.
This is fortunate for you will remember, I hope, how intimidating was the story told then: potassium (potash) and phosphorus (phosphate) are necessary for the growth of all living matter; they cannot be made or substituted for and are mined and depleted. This recitation still gives me goose bumps! But the good news is that there are at least the substantial reserves we showed a year ago and it is likely that there is considerably more. Thus, even with our current prodigal ways, we have 100 years or more to see the light. More importantly there is a very good chance that existing reserves can be greatly stretched out by the adoption of organic farming, which, when done well, can reduce the need for extra doses of potash and phosphates to a very small fraction of that used in current “Big Ag.” Perhaps at its' very best, say at least some soil experts, organic farming could totally remove the problem. If true, this would be very good news for if current practices continue, even if it took us 200 years, we would simply run through the onshore reserves and, as with erosion, end up very badly off indeed. Although, with phosphorus and potassium at least, the very rich at that point could retrieve them from the ocean and the ocean bed. My hope – and actually my belief – is that as fertilizer prices rise in the longer term (and they could certainly fall considerably in the short term) we would ..."

[-] 2 points by flip (7484) 2 years ago

thanks - we would be doing super organic farming hopefully - have you read "omnivores dilemma" - he tells about a farm invirginia that is really cool

[-] 1 points by notaneoliberal (2269) 2 years ago

Actually, rock phosphate is organic. No I haven't read that one but I just looked at a synopsis. Looks interesting.

[-] 2 points by flip (7484) 2 years ago

it is really good on the subject of food - he is an interesting writer and a good one. the farm in virginia is also in food inc

[-] 1 points by ThomasKent (131) 2 years ago

Romney, Ryan, and the Republican Party are totally out of touch with reality. They blame Obama's economic policies for the high rate of unemployment when it is unregulated banking system that can't be forced to create jobs or invest locally by law.

This is why the US Government needs gigantic public sector public works programs separate from the private sector. I think a Mississippi Valley Authority on a larger scale than the Tennessee Valley Authority would be worthy.

Romney wants to further deregulate banks. He, Ryan and the Republicans would be in shock if they knew the real status of the economy. They would have to stop or prevent the panic and anarchy that would follow if the truth came out. They would have to lie a lot.

GM Cuts 10K Jobs in Europe http://www.youtube.com/watch?v=p3nMscmA3wo&feature=youtu.be

Max Keiser on Aliens and Bankers http://www.youtube.com/watch?v=vDwO08IQR9A&feature=youtu.be

Max Keiser on Magical Thinking http://www.youtube.com/watch?v=SgNgPY3B4jI

Max Keiser on Superstitious Trading http://www.youtube.com/watch?v=LGK4_ItBORc&feature=youtu.be

Max Keiser on Currency Wars Global Derivatives http://www.youtube.com/watch?v=pSadYgsJ2rQ

[-] 1 points by Faraujo (-4) 2 years ago

You do realize that Keiser works for RT which is controlled by Russia?

Are your really serious?

You want to force banks to invest in bad projects, like China did? It's not your money to use its private citizens.

[-] 1 points by Faraujo (-4) 2 years ago

If you force somebody to invest they will move the money off shore. Name a country where it has worked.

[-] 1 points by ThomasKent (131) 2 years ago

Where did the people’s money come from? Wages, lotteries, mining, speculation, agriculture, manufacturing, intellectual property, etc. have monetary value. The determination of value is one aspect.

The people live in society. There is a commonwealth. The commonwealth is lacking in the United States. Food stamps, unemployment compensation, Medicaid, Medicare, public libraries, public education, public parks are fine, but the free world’s leader should have more free stuff.

[-] 0 points by Faraujo (-4) 2 years ago

If it is free, who is going to make it?

[-] 1 points by ThomasKent (131) 2 years ago

Do you believe we have robots exploring the Martian landscape at this very moment?

I think we have to change our approach to technology and society. If the objective of business was to become not to make a profit, but to produce more products using less energy or using renewable energy and at less cost the limit would eventually be free stuff. Ask anyone why the cost of living continues to rise though the supply and demand equation should reflect lower prices? It’s caused more by speculation, market manipulation, fraud, corruption, deregulation and less by supply and demand in a free market.

We have to ask the right questions. Is it possible to develop and manage material acquisition and waste recycling to the level that almost all waste products are reused? The materials recovered through advanced recycling and reclamation technology could be reprocessed to produce more product through automation. Imagine robots and other machines making just about everything including free stuff.

[-] 0 points by Faraujo (-4) 2 years ago

So if the goal is business is not to make money but produce goods there will be no incentive to work and people therefore will not work. What am I missing?

[-] 1 points by ThomasKent (131) 2 years ago

Money seems to be worthless without the goods it is used to "purchase." Older folk remember when a gallon of gas cost 25 cents. Today gas can cost over $4/gal around here and over $5/gal in parts of California. There is an incentive to "not" produce and create a shortage in supply in order to raise the price of gasoline and other commodities. What good will money be when there is no gasoline and no food?

Money causes the price to increase when the supply is abundant and also when there is a shortage as when suppliers manipulate the market. Would it be better to ration gasoline at $3.00/gal instead of letting the price soar toward $6.00/gal. as well as, fire the management at the oil refineries for mismanaging the gasoline production and allowing the shortage to occur in the first place? There are not enough penalties when companies profiteer from avoidable shortages , endanger public safety, and gouge the public.

[Removed]

[-] 1 points by flip (7484) 2 years ago

and what if you pass a law that says you cannot move money offshore - what an interesting idea - has it been done before - do you know anything about anything - doesn't look like it

[-] 1 points by Faraujo (-4) 2 years ago

You mean like Malaysia did where the stock market declined by 75% and the currency by 40%? You mean that one. You must be advising Obama with your great insight.

[-] 2 points by flip (7484) 2 years ago

advising obama - wow you are out there - they probably make a medication for that problem. i would imagine thorazine would be the one but i am not an expert in that field - seems like you are on it now - and drinkiing heavily - not a good combination!

[-] 2 points by flip (7484) 2 years ago

you don't like laws that restrict the rich do you? being on an ows site means not having the beg and grovel before nobility - you are aware of that right? . you do know the difference between property rights (which you seem so anxious to protect) and other rights don't you? now do you mean to imply that capital restrictions caused the crash of the asian tigers - the crash that was somewhat like ours in 2008 - or were you too young in 2008 to know what was going on? seems like you are too young now - how old are you? that can't be what you meant since that would be obvious nonsense even to a young boy - you are a boy right - girls are smarter than boys so you cannot be female - too stupid!

[-] 1 points by Faraujo (-4) 2 years ago

Don't like that I called you on your little assertion. "has it ever been done before" you asked. And then you asserted that I don't know anything. So what happened in Malaysia?

The rest of your response is drivel. Something about not having to beg. Do you beg a lot?

[-] 2 points by flip (7484) 2 years ago

so you know how to use google - nice - as to the drivel if i were you i wouldn't answer the questions either - it is your only play - young boy

[-] 1 points by Faraujo (-4) 2 years ago

Do you even know where Malaysia is?

[-] 2 points by flip (7484) 2 years ago

no - does that matter? see how one answers a question - did the crash have to do with capital restiction and do you know the difference between property right and others - it will be a bit harder using google for those two - you will need to use your mind instead. read graeber on the roman law regarding property rights then i would go to chomsky. good luck little one - oh, i forgot your best move - don't answer - you have used that on me many times with much success. you could always lie.

[-] 1 points by Faraujo (-4) 2 years ago

No, monetary controls did not cause the crash but made it worse, as liquidity declined. It's pretty basic.

Yes, I am schooled in property rights but no I don't read Chomsky.

You still haven't answered the question. You were incorrect about monetary controls, "has it ever been done before".

Fire away...

[-] 2 points by flip (7484) 2 years ago

and by the way - did you notice that capital controls would blow up your original point - did you?- "If you force somebody to invest they will move the money off shore. Name a country where it has worked." - and i think we both named countries where it has worked - and also just to be clear your idea of private citizens money is an opinion not a fact. just remember the difference between the government and the state - don't mess with the state it can take your money or even your life

[-] 1 points by Faraujo (-4) 2 years ago

It didn't work in Malaysia.

Like I said above, no I didn't read Chomsky and have no desire to. He is not an economist and not trained as one.

My ideas of private citizen's money is ingrained in US law.

[-] 2 points by flip (7484) 2 years ago

laws can and have been changed - you don't remember the asian tigers - capital controls were a big part of korea's development. i am now wondering if you are educated as an economist - that would expain your ignorance. as to chomsky you make a comment typical of those in the ideological professions (and what do economists know about property rights anyway - i thought it is a legal issue? i was actually thinking more of the philosophical side of the question - you can't asnwer it can you?) - here is what noam says about you! -“In my own professional work I have touched on a variety of different fields. I’ve done work in mathematical linguistics, for example, without any professional credentials in mathematics; in this subject I am completely self-taught, and not very well taught. But I’ve often been invited by universities to speak on mathematical linguistics at mathematics seminars and colloquia. No one has ever asked me whether I have the appropriate credentials to speak on these subjects; the mathematicians couldn’t care less. What they want to know is what I have to say. No one has ever objected to my right to speak, asking whether I have a doctor’s degree in mathematics, or whether I have taken advanced courses in the subject. That would never have entered their minds. They want to know whether I am right or wrong, whether the subject is interesting or not, whether better approaches are possible… the discussion dealt with the subject, not with my right to discuss it. But on the other hand, in discussion or debate concerning social issues or American foreign policy…. The issue is constantly raised, often with considerable venom. I’ve repeatedly been challenged on grounds of credentials, or asked, what special training do I have that entitles you to speak on these matters. The assumption is that people like me, who are outsiders from a professional viewpoint, are not entitled to speak on such things. Compare mathematics and the political sciences… it’s quite striking. In mathematics, in physics, people are concerned with what you say, not with your certification. But in order to speak about social reality, you must have the proper credentials, particularly if you depart from the accepted framework of thinking. Generally speaking, it seems fair to say that the richer the intellectual substance of a field, the less there is a concern for credentials, and the greater is the concern for content.”

[-] 1 points by Faraujo (-4) 2 years ago

So let me get this straight, Korea's development was due to capital controls and not exports due to cheap labor? This is really funny. The currency problem, as nearly all are, were due to too much debt so speculators went after them.

So Chomsky wants to be a specialist in everything. What is his economic view?

[-] 2 points by flip (7484) 2 years ago

as your original comment a ways back points out - capital flight can wreck a country. you understand that so why would you keep pushing that line? sure the u s a has helped crush the korean workers movement (as they have too many places in the world) but control of capital is extremely important wouldn't you agree. as to chomsky - you reading comprehension skills are not up to par. that is not what he said - he is making a comment on ideological professions as opposed to math and science. why would you fail to notice that - too ideological? and why would you care what chomsky thinks - you can look it up if you like. i am sure he understands how economics is used by the ruling class to maintain their status. he went to harvard you know - check out what he learned there - it might surprise you.

[-] 2 points by flip (7484) 2 years ago

you misunderstood me - i know very well it has been done before - to very good effect. that is what enabled korea to industrialize. it also kept the korean who bought the steel plant in my hometown from putting more money into it. i answered your question (it was no) but you haven't mine. why property rights are different and it is clear you have not read chomsky - fire back

[-] 1 points by flip (7484) 2 years ago

did you read the post - my understanding of max is that he thinks the country is going bust and hudson says it cannot! no agrument that romney and ryan are nuts but hudson is talking about economic lies that both parties have bought into.

[-] 1 points by ThomasKent (131) 2 years ago

Going bust or not. Unemployed and underemployed professionals, tradesmen living in shanty towns is going to become the last resort because the government would rather let private enterprise create jobs than provide the expertise, planning, administration and capital itself.

This a remnant of Reaganomics.

(c. 26:00) “When central banks create money, they do so for a long-term public purpose. They fund government spending and capital investment and public infrastructure. In most countries in the world, public infrastructure, roads, communication systems, railroads, water and sewer systems have all taken a capital investment that is larger than all the manufacturing capital investment.

[-] 1 points by mayda (57) 2 years ago

did you send this to jr