[GJM] Discussion Digest, Vol 48, Issue 29

[Janos]

Thank you for replying, Steve.
  The economy is a zero sum game. ???
You seem to be very confident about your understanding of economics and seem to have your own theoretical system based on mathematical relationships. I have to confess that I mistrust abstract models like mathematics/book keeping in economic explanations.

You also seem to think that it does not matter that most of the purchasing power (modern money) in the economy originates as debt when people borrow from the banks. That means that if people did not go into debt the "money supply" would shrink by 97 (ninety seven, unless you think that all kinds of "financial products" can also function as money) per cent. Would that not matter?

In America even notes are issued by the private Federal Reserve Bank and lent to the government against redeemable government securities.
   It doesn't matter how much currency there is, what matters is how things are valued
Are you sure about this? If total wealth on the market is valued at X billion but there is much less non-debt money in the system, does that not mean a huge deficiency of effective demand?
  ----- Original Message ----- 
  From: Steve Consilvio 
  To: discussion at globaljusticemovement.net 
  Sent: Saturday, September 22, 2007 1:10 AM
  Subject: Re: [GJM] Discussion Digest, Vol 48, Issue 29


  Janos, 


  The amount of coins circulating makes no difference, although the assumption that it is important has played a long and sordid history.  For example, the reason for the conquistadors was to find "more money."  Pirates would raid ships and steal the "colored dirt," and then sink to the bottom of the ocean with it.  And, of course, everybody has a dream of finding a treasure map so they can recover this colored dirt.  The 1840's in California was about a whole population in search of dirt.  Same concept, hundreds of years apart.  The amount of currency in circulation is not the determining factor, it is what we do with the currency that is important.


  You are right that you get an interest-free loan from the bank by floating the money, but the bank is charging your interest to others.  You contribute to the burden on the poor by enabling the bank to legitimize its ponzi scheme.  It is very hard to lead a "virtuous" economic life given how the system is currently rigged.  The bank never lends at 0% interest, they just make the appearance of doing so.  There was a time when I was selling windows, and the company had a 3% financing special (this was 25 years ago,) we simply factored the difference between the "real" rate and the apparent rate into the price quote.  If the interest savings was $200, we just padded the job $200, and wrote the note at 3%.


  The economy is a zero sum game.  There is no reason that "people must go into debt," except to perpetuate the ponzi scheme.  Once a few pigeons resist, the house of cards implodes.  The government needs to keep the ponzi scheme going because they collect their taxes from it.  The whole system is a gigantic farce.  All the economic theorists that write "greed is good" in various dresses are writing what they want to be true; that doesn't make it true.


  A lie thousands of years old is still a lie.  It doesn't matter how much currency there is, what matters is how things are valued. 2+2=5.


  The Louisiana purchase cost about $15 million.  Today you can't even build a hospital for that much.  How much would it cost to purchase that land today?  The scale of inflation is as infinite as numbers.  There is never enough currency to keep up, but with electronic digits and paper money it becomes more possible.  We can ride the expansion of values to the outer limits of the universe, but history has not shown that to be likely.  Implosion and war are more likely.


  Of course, we could change direction at any time.  But that takes more than just lil 'ol me. :-)


  peace,
  steve consilvio
  www.behappyandfree.com




  On Sep 21, 2007, at 7:03 PM, discussion-request at globaljusticemovement.net wrote:


      I wrote:   It used to be that people only went into debt for big purchases, but the credit card changed all that.



  Janos wrote:

    Not quite. What changed is that circulating cash (notes and coins) used to make up 27 per cent (and more in the 1950s and before) of the money supply. Consequently, there was much less pressure to go into debt (many more people could save within a reasonably short time and pay cash for semi-durable items).

    The hire-purchase scheme was the thin end of the wedge to habituate people into enjoying now and paying later. Now circulating cash is only 3 per cent, the rest has to be created by borrowing. People must go into debt to create a new batch of debt-money otherwise the economy slows and stalls.




    In other words there is very little circulating medium of exchange. Debt-money is a "cycling medium": borrow/create->repay/destroy; borrow/create new debt-money-> repay/destroy again... and so on.




    I have credit cards but paying them off every month, they represent interest-free loans for a month backed by reliable monthly income.





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