When will the Great Financial Ponzi end?

[finicky]

^^^
That's exactly what I was going to say. Amazing ..

 

[Value Hunter]

If one currency becomes broken we would just have to invent another, it’s happened many times. But we are a long, long way from that.

Humans have been inventing currencies to facilitate trade for thousands of years.

That is true but the point you are glossing over is that often the middle class gets wiped out in that hyper-inflationary process.

 

[Value Hunter]

An excerpt from one of John Maynard Keynes' writings: "Lenin is said to have declared that the best way to destroy the capitalist system was to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some. The sight of this arbitrary rearrangement of riches strikes not only at security but [also] at confidence in the equity of the existing distribution of wealth. Those to whom the system brings windfalls, beyond their deserts and even beyond their expectations or desires, become "profiteers," who are the object of the hatred of the bourgeoisie, whom the inflationism has impoverished, not less than of the proletariat. As the inflation proceeds and the real value of the currency fluctuates wildly from month to month, all permanent relations between debtors and creditors, which form the ultimate foundation of capitalism, become so utterly disordered as to be almost meaningless; and the process of wealth-getting degenerates into a gamble and a lottery. Lenin was certainly right. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose. In the latter stages of the war all the belligerent governments practiced, from necessity or incompetence, what a Bolshevist might have done from design. Even now, when the war is over, most of them continue out of weakness the same malpractices. But further, the governments of Europe, being many of them at this moment reckless in their methods as well as weak, seek to direct on to a class known as "profiteers" the popular indignation against the more obvious consequences of their vicious methods."

 

[qldfrog]

An excerpt from one of John Maynard Keynes' writings: "Lenin is said to have declared that the best way to destroy the capitalist system was to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some. The sight of this arbitrary rearrangement of riches strikes not only at security but [also] at confidence in the equity of the existing distribution of wealth. Those to whom the system brings windfalls, beyond their deserts and even beyond their expectations or desires, become "profiteers," who are the object of the hatred of the bourgeoisie, whom the inflationism has impoverished, not less than of the proletariat. As the inflation proceeds and the real value of the currency fluctuates wildly from month to month, all permanent relations between debtors and creditors, which form the ultimate foundation of capitalism, become so utterly disordered as to be almost meaningless; and the process of wealth-getting degenerates into a gamble and a lottery. Lenin was certainly right. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose. In the latter stages of the war all the belligerent governments practiced, from necessity or incompetence, what a Bolshevist might have done from design. Even now, when the war is over, most of them continue out of weakness the same malpractices. But further, the governments of Europe, being many of them at this moment reckless in their methods as well as weak, seek to direct on to a class known as "profiteers" the popular indignation against the more obvious consequences of their vicious methods."

Call the profiteers the boomers, and rant about rents, neg gearing and the ever increasing median house prices

 

[Value Hunter]

Value Collector your basic analysis goes like this "If I own a chocolate factory and I produce 1 million bars of chocolate it doesn't matter what the currency is I am still producing 1 million bars of chocolate".

But it needs to be remembered you are not producing the 1 million bars of chocolate simply for the sake of producing them. You are producing them because their is sufficient demand for 1 million bars of chocolate. If people stop borrowing money or people's savings get wiped out from inflation then there might only be demand for 1/2 million chocolate bars instead of 1 million so you start producing 1/2 million.

If there is any doubt about this just look at a chart of the Venezuelan stock market over the past 20 years measured in U.S. dollars and it will paint a clear enough picture.

 

[Smurf1976]

despite what outdated textbooks might say its actually loans that create deposits rather than deposits creating loans

I'm not following this.

Whilst I don't invest in cash for the long term, I do have money in the bank as such.

Are you saying that if not enough people took loans out then the bank would refuse to accept my money as a deposit?

 

[Value Collector]

So by going with your logic, that $Trillion in debt that was created in just 100 days means there is now a $Trillion in fresh new assets???

Re read what I wrote, if you owe me $1 you have a debt burden, but I have an asset worth $1. So if looking at the global economy as a whole, all debts are offset by assets. So there is Net debt of $0, at least until we start borrowing from aliens.

The $USD is basically worthless, the rest of the world knows it, it's just a matter of (very short) time before there is an organised crash into CBDC

I can assure you that the USD is not worthless, I was in the USA a couple of months ago and was able to swap USD for all sorts of products and services, I rented cars, stayed in hotels, ate meals etc etc people everywhere were willing to give up their time and products in return for some USD.

 

[Value Collector]

1. While its by definition theoretically/nominally true in reality it doesn't work like that. Fractional reserve banking doesn't operate that way.

2. Either way its a moot point because if somebody borrows $1 and does not have the capacity to pay it back in reality your asset is worth $0 instead of $1. The fact that you choose to bury your head in the sand and pretend the asset is still worth $1 does not make it worth $1 in reality.

1. The fractional reserve banking system doesn't change my original point at all.

2. if they can't pay it back, then I have lost my $1 asset, but he is talking about the USA government and they have the ability to tax the worlds largest economy, as well as print money, they are going to pay the $1 back. but we are getting pretty far away from my original point there

 

[Value Collector]

Value Collector your basic analysis goes like this "If I own a chocolate factory and I produce 1 million bars of chocolate it doesn't matter what the currency is I am still producing 1 million bars of chocolate".

But it needs to be remembered you are not producing the 1 million bars of chocolate simply for the sake of producing them. You are producing them because their is sufficient demand for 1 million bars of chocolate. If people stop borrowing money or people's savings get wiped out from inflation then there might only be demand for 1/2 million chocolate bars instead of 1 million so you start producing 1/2 million.

If there is any doubt about this just look at a chart of the Venezuelan stock market over the past 20 years measured in U.S. dollars and it will paint a clear enough picture.

You are missing my point.

My point is that the "Value" isn't in the debt or the currency.

The value is generated at every step of the process of making that chocolate bar. eg when the miners mined they minerals to make the fertiliser that generated value, when the sugar cane and coco beans grew and were harvested that generated value, when they were processed at the sugar mill and coco bean factory that generated value, when they were finally turned into a chocolate bar at the factory that generated value etc etc.

This is what I am talking about, every day labour and capital are deployed generating value. whether you borrow $1 from me to buy that chocolate bar, or I use my $1 myself is irrelevant.

 

[Value Collector]

The global economy produces over $100 Trillion of products and services each year, and the vast majority of that is not some artificial thing inflated by debt, its people getting up every morning and deploying their labour and capital into producing things that other people want and need, in return for getting the things they want and need.

Some people are consuming more than they produce and incurring see debt, others are consuming less than they produce and providing loans.

Thats what the economy is, its the aggregated total of all us just doing there thing, its the farmers farming, the builders building, the bar tenders bar tending, the bakers baking etc etc all serving and working for each other for our own self interest.

 

[investtrader]

An interesting dilemma for The Controllers?

Global equity markets breaking record highs on a daily basis, presumably on the 'assumption' that our banking overlords will cut interest rates, yet their underlying economies continue to stagnate in stagflationary cost-of-living quagmires?

Equity markets clearly do not reflect any underlying economic fundamentals, as usual, even more so than in 2008 when the GFC began (and still continues).

Everything is being held together with cotton twine and $Trillions in money printing...because they got away with it all those years ago.

So, when will THEY pull the pin & go for a reset?

3,000 posts and 27 reactions. Sounds like you need to crawl back down the conspiracy theory hole on FB or Twitter or wherever you concocted your dribble as no one on this forum is interested in it.

 

[divs4ever]

3,000 posts and 27 reactions. Sounds like you need to crawl back down the conspiracy theory hole on FB or Twitter or wherever you concocted your dribble as no one on this forum is interested in it.

what if the conspiracy is not a theory

check out some of the WEF videos ( after all they are both well-heeled and invited to that nice resort )

not to mention the rantings at the EU Commission and the ECB

history shows the two preferred exits from the mess we are in

a HUGE attention-distracting war , or a complete devaluation of the current fiscal system by entrenched inflation

there MIGHT be another solution , but who is willing to try it ( not the cry-babies currently running various major economies )

 

[cynic]

3,000 posts and 27 reactions. Sounds like you need to crawl back down the conspiracy theory hole on FB or Twitter or wherever you concocted your dribble as no one on this forum is interested in it.

For the benefit of those previously unaware, many of Uncle's posts predated the advent of the "reaction" functionality on this forum - hence the reason for the low ratio.

I anticipate said ratio will improve as time progresses.

 

[Joe Blow]

3,000 posts and 27 reactions. Sounds like you need to crawl back down the conspiracy theory hole on FB or Twitter or wherever you concocted your dribble as no one on this forum is interested in it.

As @cynic has pointed out, most of Uncle Festivus' active participation at ASF was before the introduction of the reaction functionality which would explain the low reaction count. Also, may I suggest a more cordial response in future. Whether or not you agree with someone, it is always best to treat others with courtesy and respect.

 

[Value Hunter]

The global economy produces over $100 Trillion of products and services each year, and the vast majority of that is not some artificial thing inflated by debt, its people getting up every morning and deploying their labour and capital into producing things that other people want and need, in return for getting the things they want and need.

You really didn't address any of my points and seem to have a lack of understanding of basic economic history. The obvious point is consumption is being propped up by hugely by debt and you haven't made any actual quantitative argument to invalidate it.

If people stopped borrowing money do you think demand for products and services would remain over $100 trillion?

And obviously if demand goes down supply will follow. A factory that is producing at 100% of capacity when the economy is booming might drop to cranking out product at 50% of capacity when the economy is in the doldrums.

Think about during the great depression how long it took for things to fully recover. And remember that now debt levels around the world (as a percentage of GDP, etc) are much higher now than they were back then so when the big downturn eventually comes it could take evn longer to recover from. But more likely the crises will unfold in a hyper-inflationary manner like the Weimar republic or Venezeula or Zimbabwe.

Some people are consuming more than they produce and incurring see debt, others are consuming less than they produce and providing loans.

You really don't have a good grasp of the fractional reserve banking system do you? A lot of these loans come from money being lent/printed into existence rather genuine savings (as would occur under a hard money system).

 

[divs4ever]

the 'borrowing ' isn't so bad as long as you can repay the debt in full and not need bankruptcy protection

now IF you have a situation where you can't even service the interest payments without resorting to borrowing more ... well i have a very unkind phrase for that

 

[Value Collector]

You really didn't address any of my points and seem to have a lack of understanding of basic economic history. The obvious point is consumption is being propped up by hugely by debt and you haven't made any actual quantitative argument to invalidate it.

If people stopped borrowing money do you think demand for products and services would remain over $100 trillion?

And obviously if demand goes down supply will follow. A factory that is producing at 100% of capacity when the economy is booming might drop to cranking out product at 50% of capacity when the economy is in the doldrums.

Think about during the great depression how long it took for things to fully recover. And remember that now debt levels around the world (as a percentage of GDP, etc) are much higher now than they were back then so when the big downturn eventually comes it could take evn longer to recover from. But more likely the crises will unfold in a hyper-inflationary manner like the Weimar republic or Venezeula or Zimbabwe.

You really don't have a good grasp of the fractional reserve banking system do you? A lot of these loans come from money being lent/printed into existence rather genuine savings (as would occur under a hard money system).

there is two points you are missing,

1. Only a small portion of that that >$100 Trillion of economic output comes from debt that. Could be considered, unsustainable. Most of it is just run of the mill production, another portion is just debt that’s perfectly sustainable and healthy.

2. Then the main point you are missing is that the Demand funded by debt, is offset by the lender giving up their right to spend those $$$.

For example The largest buyer of US government bonds is Berkshire Hathaway, when Berkshire lends money to the USA government instead of paying dividends it reduces the spending of its shares holders, which offsets that extra government spending.

3, there is also a third point that the debt argument is kind of artificial, the means of production exist regardless of the debt, debt decides how we employ the assets but you default on all the worlds debt and it would make some waves, but things would quickly reorganise and the economy would keep ticking,

If all the homes loans failed the houses don’t disappear,

 

[Value Collector]

You really don't have a good grasp of the fractional reserve banking system do you? A lot of these loans come from money being lent/printed into existence rather genuine savings (as would occur under a hard money system).

I understand it well, you clearly don’t because you are misrepresenting it.

In a fractional reserve banking system every $1 in loans is still back by a deposits, banks can not lend out more than they have in deposits (or other debt instruments.

Eg, the can’t lend out $5 based on a $1 deposit, they must keep a “fractional amount of each deposit as a reserve”

So if you deposit $100 they bank can only lend out $90,

Where you are confused is that you have heard conspiracy theories of banks creating money and turning $1 of deposits into $10 of loans, this doesn’t really happen.

What happens is you deposit $1000, they lend $900 which is spend and deposited which allows them to loan another $810

So there is $1810 of loans, but it’s backed by $2,000 of deposits.

But as I said none of that matters, what really matters is the out put of the economy.

 

[Value Hunter]

In a fractional reserve banking system every $1 in loans is still back by a deposits, banks can not lend out more than they have in deposits (or other debt instruments.

What happens is you deposit $1000, they lend $900 which is spend and deposited which allows them to loan another $810

Again as I said before loans create deposits not the other way around. Steve Keen covers this topic well and even the reserve bank of England wrote a paper admitting this to be true. The deposits create loans orthodox model of economic textbooks was always just a theoretical construction used as an explanatory device and was never based on the real world.

Also we haven't even touched on how debt has a multiplier effect on asset prices.

But anyway I am not going into a full argument about this topic as it could be its own 50 page thread!

But as I said none of that matters, what really matters is the out put of the economy.

The output of the economy will drop when demand drops due to indebtedness.

1.Only a small portion of that that >$100 Trillion of economic output comes from debt that. Could be considered, unsustainable. Most of it is just run of the mill production, another portion is just debt that’s perfectly sustainable and healthy.

This goes to the heart of the argument and you a making a fundamental assertion with zero proof. When you have some kind of numerical proof to support this argument come back and we can have a logical discussion, but you merely asserting it as truth does not make it to to be true.

 

[Value Collector]

Again as I said before loans create deposits not the other way around. Steve Keen covers this topic well and even the reserve bank of England wrote a paper admitting this to be true. The deposits create loans orthodox model of economic textbooks was always just a theoretical construction used as an explanatory device and was never based on the real world.

Also we haven't even touched on how debt has a multiplier effect on asset prices.

But anyway I am not going into a full argument about this topic as it could be its own 50 page thread!


The output of the economy will drop when demand drops due to indebtedness.


This goes to the heart of the argument and you a making a fundamental assertion with zero proof. When you have some kind of numerical proof to support this argument come back and we can have a logical discussion, but you merely asserting it as truth does not make it to to be true.

Loans create deposits if after the loan has been drawn and spent the money gets deposited again, but that’s no issue, not much different to the same $100 note being spend multiple times.

Yes the out put of the economy may drop, but it may not, if the velocity of money increases.

Numerical proof of the argument is just common sense, most spending isn’t coming from debt, it’s just people spending doing their weekly wages, and in some cases spending money that is sustainably borrowed like home loans etc.