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Would it be a good thing if the government balanced the budget and had zero debt?
That means it would be a perfect country and everybody would be happy right..
Banks create new money (debt) based on the amount of reserves they hold in deposit at their bank. That money can come from individual depositors or from the Federal Reserve. The typical ratio is 9:1. This means for every $1111 a bank has on deposit, they can create a new loan in the amount of $10k. The system works fine until you realize that more money(debt) has been created than can ever be paid back.
For more information, I'd suggest the wiki entry and the video below.
Many have us have been trying . My face is blue from explaining it to people who did not care to hear it and some of us are tired. Thomas Jefferson told us 200 years ago what would happen to us.
Now when you get it it turns on like a light. When people don't they start with the
cliche`. I have several threads on it.
Many have us have been trying . My face is blue from explaining it to people who did not care to hear it and some of us are tired. Thomas Jefferson told us 200 years ago what would happen to us.
Now when you get it it turns on like a light. When people don't they start with the
cliche`. I have several threads on it.
I've had people who work in the banking industry watch that video Money as Debt. They didn't even realize that's how it worked. And we wonder why we have so many problems.
Fact of the matter is, a central bank charging interest on the money they conjure into existence is creating more debt than can ever be repaid. If you borrow $100 at a 1% interest rate, you will owe $101. If the Fed only created $100, how can you repay the interest? You have to get it from someone else who defaults on their repayment of debt.
Just for grins, try to imagine an economy without Fractional Reserve Banking where only the Treasury could create money. If a bank had 100 depositors with $1000 each ($100,000 total) the bank could lend only $90,000 so it has some money on hand for normal withdrawals. There would be no revolving credit but there would be debit cards limited to the amount in the account.
The government could only borrow for major capitol projects (not for wars) and only for a limited time with other expenses coverd by taxes.
Just for grins, try to imagine an economy without Fractional Reserve Banking where only the Treasury could create money. If a bank had 100 depositors with $1000 each ($100,000 total) the bank could lend only $90,000 so it has some money on hand for normal withdrawals. There would be no revolving credit but there would be debit cards limited to the amount in the account.
The government could only borrow for major capitol projects (not for wars) and only for a limited time with other expenses coverd by taxes.
How would this work?
Well it would depend on how much money the Treasury was willing to create. That would depend on how much backing that money had. A better system uses fractional reserve banking and a commodity like what we had during the 50s and 60s before Bretton Woods. No monetary system is without hazards. As in most cases, a mix of two systems seems to work best.
I've had people who work in the banking industry watch that video Money as Debt. They didn't even realize that's how it worked. And we wonder why we have so many problems.
Fact of the matter is, a central bank charging interest on the money they conjure into existence is creating more debt than can ever be repaid. If you borrow $100 at a 1% interest rate, you will owe $101. If the Fed only created $100, how can you repay the interest? You have to get it from someone else who defaults on their repayment of debt.
Hi paperhouse,
I am never sure how to put it but essentially we can say when one goes to a bank you don't borrow it they create it. Many people just can't believe it even when the system is explained. I guess the sleight of hand is confusing. When money is printed people assume that is the value. However if someone owns a house free and clear and a bank loans out money to someone who buys it, the asset will then be owned through debt at interest. Nothing new was created nor was consumption deferred since the deposit is a demand deposit creating a fractional reserve. Its simply money supply growth at interest. So the analogy is they create debt ownership which is like a leech creating an artery they can suck. This predicts more people will go from equity ownership to debt ownership.
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. My face is blue from explaining it to people who did not care to hear it and some of us are tired. Thomas Jefferson told us 200 years ago what would happen to us. 
