Interest rates.

[slider123456]

Quote from sjfan:

Yes - you keep saying these things; But much like an elementary school student, you don't show your work and hope to pass on just your say so.

You still haven't answer the fundamental question of why, if you believe what you believe, you are not accepting my proposal for a loan?

Under the current system a loan at %0 would be quite foolish because the interest rates the bank charge necessarily creates inflation. Say there is a $1,000,000 worth of goods so the bank gives someone a capital investment of 1,000,000 with an interest rate of %5. Say he pays back the interest to get it out of the way he would now not have enough money to buy back the goods. He would now have $950,000 dollars to buy $1,000,000 worth of goods. His money now buys him less. Interest causes inflation if there were no interest there would be no inflation. Some people might not like that idea but the way things are going that will be a small percentage of the population.

The trade-off is that all goods would be cheaper for example the house I mentioned would cost me $250,000 worth of labor instead of $550,000 worth of labor. That would be reflected in the price of everything to some degree probably equating to around %40 off.

 

[sjfan]

Quote from Capablanca:

Sjfan you are making the wrong offer to Slider. You can reverse it and put him even more on the spot.

Point taken buddy - but I'm just trying to earn some cash from this guy; It's pretty obvious that our "logic" is circular and therefore won't work on him and our knowledge is corrupted by some magnificant idiocy that he alone can see through.

 

[slider123456]

Quote from Cache Landing:

I say conspiracy theory because the ideas you are presenting aren't new. They are plastered all over all the conspiracy theory blogs that plague the interenet. The ones claiming that our nation is run by the Rothschilds and other Bilderberg members.

Anyway, you are an overwhelming minority who think the trade-off isn't worth it. The vast majority of people think the cost of interest is absolutely worth it. That is why they keep taking out loans.

You are right in the statement that the driver for our economy is our production, but what you should also realize is that those same goods are what backs our currency.

I should also make one comment because you keep using anecdotal evidence to support claims that quality of life is lower than it used to be. That is simply not true. Take for instance your 1970s example. You claim that people now must work two jobs to afford the same lifestyle, when they only had to work one job in the 70s. That's pure nonsense! Allow me to use factual statistics rather than anecdotal evidence to demonstrate.

The median income of a family in the mid 70's without the wife in the workforce was $13,000 per year. If you adjust that for inflation it comes in at about $46,500 in today's buying power.

The current median family income without the wife working is $49,000.

The average square footage of a home in the 1970's was 1550. The average square footage now is about 2500 square feet. We have to work two jobs now to afford keeping up with the Joneses, not to afford the same lifestyle.

I could afford a 1970's lifestyle off of a job at a burger joint. No cable bill for TV or internet. No cell phone bill. Buy a car that is only expected to last 100,000 miles and can only handle speeds of about 70mph.

People are working two jobs now because the standard of living is increasing faster than their pay, not because inflation is increasing faster than their pay.

I have never heard those conspiracy theories. I learned about this from a story explaining how on an island it is impossible to pay back the loan. You would have to counterfeit the interest otherwise it is impossible to pay back $1050 on a $1000 dollar %5 loan you would have to borrow the $50 bucks then borrow the interest on that then borrow the interest on that until it was paid.

You are probably right that quality of life has not gone down that much but it is speeding up and recently I have seen many people who are saying they have to pay $5000 dollars more to live but only getting $1500 in increased wages. It is beginning to spiral out of control. The only reason our quality of life is not much worse is all the efficiencies we have created in the last few years that save money. Such as the internet and a multitude others. If we did not pay interest our quality of life would be way higher due to those efficiencies on average.

 

[Capablanca]

Quote from slider123456:

Under the current system a loan at %0 would be quite foolish because the interest rates the bank charge necessarily creates inflation. Say there is a $1,000,000 worth of goods so the bank gives someone a capital investment of 1,000,000 with an interest rate of %5. Say he pays back the interest to get it out of the way he would now not have enough money to buy back the goods. He would now have $950,000 dollars to buy $1,000,000 worth of goods. His money now buys him less. Interest causes inflation if there were no interest there would be no inflation. Some people might not like that idea but the way things are going that will be a small percentage of the population.

The trade-off is that all goods would be cheaper for example the house I mentioned would cost me $250,000 worth of labor instead of $550,000 worth of labor. That would be reflected in the price of everything to some degree probably equating to around %40 off.

I will let you in on a basic idea regarding capitalism Slider. The assumption a bank makes when it lends you money is that you'll put it to good use that will ultimately net you a return higher than the interest they will charge. As long as you can achieve that higher return you shouldn't care too much what the interest rate is.

What credit does is buy you time and opportunity that otherwise might not be available. That is invaluable if applied correctly and productively. Problem is there seem to be so many people who have access to credit who have no clue what to do with it and end up squandering it. My guess is that you are one of those people who don't know what to do with credit because if you did know what to do with credit you wouldn't be complaining about having it and needing to pay interest on it.

 

[slider123456]

Quote from sjfan:

Point taken buddy - but I'm just trying to earn some cash from this guy; It's pretty obvious that our "logic" is circular and therefore won't work on him and our knowledge is corrupted by some magnificant idiocy that he alone can see through.

I did not think this up myself Richard Cook is one of the places I learned about it the only reason I even considered it was the island story.

I guess it is not circular logic really it just applies to a different economic ytem than one that would have no interest. Most people would not mention an idea like this when the economy was running good but to me at this point in time it looks very attractive maybe not for others though. Especially if they are the %2 with most of the wealth which keeps getting worse every year.

 

[Cache Landing]

Quote from slider123456:


You are probably right that quality of life has not gone down that much but it is speeding up and recently I have seen many people who are saying they have to pay $5000 dollars more to live but only getting $1500 in increased wages. It is beginning to spiral out of control. The only reason our quality of life is not much worse is all the efficiencies we have created in the last few years that save money. Such as the internet and a multitude others. If we did not pay interest our quality of life would be way higher due to those efficiencies on average.

You're missing the point. I'm not saying that quality of life has only dropped a little. I'm saying that quality of life has INCREASED faster than average income. People are seeing the new things to buy and they are willing to go into debt to get it.

There will always be brief moments when wage increases don't immediately compensate for cost of living increases, but over the long term it all balances out.

You also aren't understanding that if we operated under the system that you envision, these "efficiencies" you speak of would not be possible. The internet would still be hundreds of years away if companies weren't able to borrow. Quality of life would not be "way higher", because the necessary innovations whould not yet be realized. It would take hundreds of years to achieve the same progress that it currently takes 10 years to achieve.

The only way your "system" works is for the g-ment to take interest from the public in the form of tax. IOW, involuntary interest for all. At least under the current system I can choose not to pay interest, and what's even better, I can choose to receive interest from those who are willing to pay it.

 

[slider123456]

Quote from Capablanca:

I will let you in on a basic idea regarding capitalism Slider. The assumption a bank makes when it lends you money is that you'll put it to good use that will ultimately net you a return higher than the interest they will charge. As long as you can achieve that higher return you shouldn't care too much what the interest rate is.

What credit does is buy you time and opportunity that otherwise might not be available. That is invaluable if applied correctly and productively. Problem is there seem to be so many people who have access to credit who have no clue what to do with it and end up squandering it. My guess is that you are one of those people who don't know what to do with credit because if you did know what to do with credit you wouldn't be complaining about having it and needing to pay interest on it.

I understand what you are saying I am just saying a system with no interest would knock the price of everything down substantially and would still allow people who made good decisions to prosper more than most. The ability to make money by leveraging interest would be gone but there are lots of other ways to make money and if prices were much lower you would not need to spend as much time to get the things you wanted.
As new efficient ways of doing things were discover the price would continually go down not up meaning you would work even less if wanted or work the same amount and get more.

 

[sjfan]

Quote from slider123456:

learned about this from a story explaining how on an island it is impossible to pay back the loan.

You invalidate centuries of thinking based on a story you heard? How about this story?

Let's say there's an island that has exactly 100 coins used for exchange (the number of coins will never grow). It produces one kind of good and consumes only that good: corn. Morever, an ear of corn can be used as seed and will yield 10 ears in ten years.

Let's say in year 1, a fellow comes along and asks to borrow a coin from you for no interest. You agree (since no more coins will ever be produced). In year ten he gives you the coin back. Are you okay with this? You shouldn't be. Because in year 1, you could have used your coin to buy, say 10 ears and have 100 years by year ten. However, since you got the coin back in year ten, you could still only buy 10. You lost out on 90 ears of corn.

This problem can be remedied by asking your borrowing friend to pay you a certain number of ears of corn every year to compensate you. But what is that? That's interest.

Notice how you need to collect interest on borrowed coins in an island economy with hard, unchanged currency so long as there's production?

 

[slider123456]

Quote from Cache Landing:

You're missing the point. I'm not saying that quality of life has only dropped a little. I'm saying that quality of life has INCREASED faster than average income. People are seeing the new things to buy and they are willing to go into debt to get it.

There will always be brief moments when wage increases don't immediately compensate for cost of living increases, but over the long term it all balances out.

You also aren't understanding that if we operated under the system that you envision, these "efficiencies" you speak of would not be possible. The internet would still be hundreds of years away if companies weren't able to borrow. Quality of life would not be "way higher", because the necessary innovations whould not yet be realized. It would take hundreds of years to achieve the same progress that it currently takes 10 years to achieve.

The only way your "system" works is for the g-ment to take interest from the public in the form of tax. IOW, involuntary interest for all. At least under the current system I can choose not to pay interest, and what's even better, I can choose to receive interest from those who are willing to pay it.

I am saying that without interest the costs of goods would drop substantially I would not have to do $550,000 worth of work to buy a $250,000 dollar house that cost cut equates to a much better quality of life. You would get a lot more goods for the same amount of work.

I do not believe things would take longer because people who where so inclined would have much more time to try to make different inventions whereas now that is not the case there may be many people with great ideas who cannot try them because they have their nose to the grindstone to survive.

There would be no need for I.O.U. just a thoroughly regulated bank who would give out loans as they do now and appraise the cost of things through a board so their would be no corruption. They would have to put out all info to the public domain for inspection. If you had a house and wanted to borrow against it's capital it would be appraised and a loan given if you did not pay it back they would take the assest.

If all the prices came down people could afford to give %5 tax to government to do infrastructure and upkeep and fund big ideas with big potential much like now.

 

[Cache Landing]

Quote from slider123456:

I did not think this up myself Richard Cook is one of the places I learned about it the only reason I even considered it was the island story.

This is what I mean about conspiracy theorists.

Quoted from Richard C. Cook

"Finally I arrived at the question I had tried to avoid but which readers were constantly asking about: Was the economic and monetary chaos due to some kind of conspiracy? And if so, was the conspiracy the one so many people speculated about—a plot by a handful of elitists to create a New World Order involving “one-world government,” etc.?

So my thinking turned in that direction, with my answer a qualified, “Yes.”

................................

Finally, was there a conspiracy to place George W. Bush in the office of the presidency of the United States in 2000 rather than Albert Gore? Did the U.S. government deliberately look the other way or even plan and participate in the terrorist attacks of September 11, 2001? Did the Bush administration work hand-in-hand with Alan Greenspan and the Federal Reserve in creating the housing bubble in order to keep the U.S. economy afloat while the wars in Afghanistan and Iraq were being carried out? And is planning going on behind the scenes for the U.S. military to launch an attack on Iran before George W. Bush and Richard Cheney leave office?

I believe the answer to all these questions is “Yes.”

You should realize who you are listening to, and figure out what angles they have before you accept their ideas.