You are using an out of date browser. It may not display this or other websites correctly.
You should upgrade or use an alternative browser.
You should upgrade or use an alternative browser.
All money is created out of debt? -or not?
- Thread starter Newmoney24
- Start date
Quote from vicirek:
But the question was how money is created.
I thought you covered it good when you said "created by government debt issuance".
i was only trying to keep it simple by reminding the OP that money is a note, "legal tender for all debts public and private". i think sometimes it's easy to think that dollars are "real assets". Money is only a piece of paper saying that the holder of the note is promised a nominal value that is backed by a government.
Quote from Newmoney24:
They say all money is created out of debt because when a loan is given, it is due back with interest,
OK, but my question is, Is this always the case?-
For instance, if the Fed gives $1T to the US government, but gives it in exchange for government bonds/treasuries, then isn't this an EXCHANGE? (not a loan)
if this is the case, there won't be interest accrued on the $1T, because it is not owed back to the Fed (because the Fed got treasuries in return)
Looking forward to hearing from you guys, thanks~
When you say that the FED "gives" 1T to the government, did you mean that the FED issued debt to someone who gave them cash to give to the government OR that they created it out of thin air and the government forced everybody to use it as "legal tender" (almost like real money) at the pain of death (in the extreme cases)? You need to be clear. How is giving something for nothing but paper an EXCHANGE?
The word CON man came from CONfidence man because gaining confidence can do a lot. Money is debt to someone somehow (largely because of the CONfidence model of double entry simple bookkeeping and balance sheets with items as GOODWILL) and is also simply based on CONfidence as well. If the money is rejected by people using it, then it is worth nothing - a promise to pay is simply based on CONfidence. The FED and the government work together simply acting to pump up CONfidence.
You are correct that there are a few cases where money is not debt. That is called counterfeiting, also known has interest payments. In your example above, suppose that the government makes 12 monthly payments and then the FED paid off the debt and destroyed the exchange bonds and destroyed them. We are not returned to zero again, which would be an exchange system that would exist in the real world. There would be 12 monthly interest payments which end up backed by nothing at all. In the miracle of government and FED money creation, something appeared out of nothing!
Reported, Einstein once said something like the greatest miracle in the world was compound interest. I think he was being sarcastic but very few got the joke.
Keynes said, in the long run (SIC if the stimulus money were never paid back) we are all dead. I think he was thinking of someone's sarcastic remark. Of course, he knew the truth, but in the echelon's of power, you tell the people what they want to hear I guess.
Comprender compadre?
Yes, all money is debt.
Either created by the Federal Reserve, or commercial banking system, money is literally created into existence via fractional reserve lending (commercial banking) or outright monetization (Central Bank 'printing'). To wit, much of the tier 1 capital reserves banks pledge as collateral to issue new money (bank "loans"), are loans from the FED or other commercial banks, which again, represents money conjured out of thin air (conjuring a conjuring).
Every US dollar in circulation - paper or digital - represents a debt owed to someone, somewhere, accruing interest, as we speak. The last time I checked, the total stock of USD (total credit market debt) is roughly 60 Trillion dollars. For those that got this far, consider this: 60 Trillion x ~3% average interest rate = 2 Trillion in debt-accrued interest payments, per year. Or roughly 12% of US GDP goes to pay accumulated interest, in any given year. This is why the stock of money (ie deflationary depressions), must happen, and are healthy and vital to the longevity of any fractional reserve system. Otherwise, when the total stock of money (iow, debt) is too large, accumulated interest eats the economy alive. Like a milestone around our necks. Which is exactly the problem right now..
Economics textbooks mistakenly emphasize Government debt issuance as the main driver of credit growth. Even if no Government debt was issued, Central Banks could (and in practicality, do), loan money to commercial banks, which are used as reserves, to make commercial loans. Government debt is not necessary or needed for money to be created. It's sort of Keynesian spin to sell the "necessity" of high Government debt (bullshit).
Either created by the Federal Reserve, or commercial banking system, money is literally created into existence via fractional reserve lending (commercial banking) or outright monetization (Central Bank 'printing'). To wit, much of the tier 1 capital reserves banks pledge as collateral to issue new money (bank "loans"), are loans from the FED or other commercial banks, which again, represents money conjured out of thin air (conjuring a conjuring).
Every US dollar in circulation - paper or digital - represents a debt owed to someone, somewhere, accruing interest, as we speak. The last time I checked, the total stock of USD (total credit market debt) is roughly 60 Trillion dollars. For those that got this far, consider this: 60 Trillion x ~3% average interest rate = 2 Trillion in debt-accrued interest payments, per year. Or roughly 12% of US GDP goes to pay accumulated interest, in any given year. This is why the stock of money (ie deflationary depressions), must happen, and are healthy and vital to the longevity of any fractional reserve system. Otherwise, when the total stock of money (iow, debt) is too large, accumulated interest eats the economy alive. Like a milestone around our necks. Which is exactly the problem right now..
Economics textbooks mistakenly emphasize Government debt issuance as the main driver of credit growth. Even if no Government debt was issued, Central Banks could (and in practicality, do), loan money to commercial banks, which are used as reserves, to make commercial loans. Government debt is not necessary or needed for money to be created. It's sort of Keynesian spin to sell the "necessity" of high Government debt (bullshit).
Quote from achilles28:
Yes, all money is debt.
Either created by the Federal Reserve, or commercial banking system, money is literally created into existence via fractional reserve lending (commercial banking) or outright monetization (Central Bank 'printing').
Gov't can also just pay government salaries via printing. No debt. If you define the salary as a "debt," you are proving too much. So I don't see how "all money is debt." If you define money as debt, then yes, you are trivially correct.
Quote from billyjoerob:
Gov't can also just pay government salaries via printing. No debt. If you define the salary as a "debt," you are proving too much. So I don't see how "all money is debt." If you define money as debt, then yes, you are trivially correct.
The Government doesn't operate like that. First, the Treasury doesn't have the authority to print money. Only the FED does. When the FED prints money, it is printed on the basis that it is a debt owed to the FED, with the interest owed to the Treasury (usually). That's how the system works.
Lincoln issued Greenbacks and JFK authorized the creation of silver/gold backed notes. That was true debt free currency because it was created without a debt. No interest accrued on the currency they created. Notice both were assassinated.
Yeah it's interesting that congress was given power by the constitution to print money, yet we instead gave away this power to a private institution (the Fed) and choose to become indebted to them when we don't have to.
Does anyone else think something is seriously wrong with this, or is it just me? Why is there vain debates on tax increases, tax cuts, and other things that don't matter when compared to such a gigantic issue such as a private organization printing money for this country?
Does anyone else think something is seriously wrong with this, or is it just me? Why is there vain debates on tax increases, tax cuts, and other things that don't matter when compared to such a gigantic issue such as a private organization printing money for this country?
Below is the answer.
Well done. Achilles28 is a person who thinks in systems.
Well done. Achilles28 is a person who thinks in systems.
Quote from achilles28:
Yes, all money is debt.
Either created by the Federal Reserve, or commercial banking system, money is literally created into existence via fractional reserve lending (commercial banking) or outright monetization (Central Bank 'printing'). To wit, much of the tier 1 capital reserves banks pledge as collateral to issue new money (bank "loans"), are loans from the FED or other commercial banks, which again, represents money conjured out of thin air (conjuring a conjuring).
Every US dollar in circulation - paper or digital - represents a debt owed to someone, somewhere, accruing interest, as we speak. The last time I checked, the total stock of USD (total credit market debt) is roughly 60 Trillion dollars. For those that got this far, consider this: 60 Trillion x ~3% average interest rate = 2 Trillion in debt-accrued interest payments, per year. Or roughly 12% of US GDP goes to pay accumulated interest, in any given year. This is why the stock of money (ie deflationary depressions), must happen, and are healthy and vital to the longevity of any fractional reserve system. Otherwise, when the total stock of money (iow, debt) is too large, accumulated interest eats the economy alive. Like a milestone around our necks. Which is exactly the problem right now..
Economics textbooks mistakenly emphasize Government debt issuance as the main driver of credit growth. Even if no Government debt was issued, Central Banks could (and in practicality, do), loan money to commercial banks, which are used as reserves, to make commercial loans. Government debt is not necessary or needed for money to be created. It's sort of Keynesian spin to sell the "necessity" of high Government debt (bullshit).
Quote from achilles28:
The Government doesn't operate like that. First, the Treasury doesn't have the authority to print money. Only the FED does. When the FED prints money, it is printed on the basis that it is a debt owed to the FED, with the interest owed to the Treasury (usually). That's how the system works.
Lincoln issued Greenbacks and JFK authorized the creation of silver/gold backed notes. That was true debt free currency because it was created without a debt. No interest accrued on the currency they created. Notice both were assassinated.
Glad we're clear on the idea of "debt free currency." Kinda puts the kibosh on "all money is debt," no?