Japan Quake Shakes U.S. Treasury Bond Market Get Ready for Financial Meltdown

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Japan Quake Shakes U.S. Treasury Bond Market Get Ready for Financial Meltdown

http://www.marketoracle.co.uk/Article27004.html

With Japan and the Gulf States alone accounting for 25% of the total 4.4 trillion USD of US federal debt (December 2010), LEAP/E2020 believes that this new situation which is asserting itself during the first quarter of 2011, against a background of China’s increasing reluctance (holding 20% of US Treasury Bonds) to continue to invest in US government debt (4), carries the seeds for the collapse of the US Treasury Bond market in the second half of 2011, a market that now has only a single buyer: the US Federal Reserve (5).

It is certain that the context of the crisis of US local authority securities (Munis) and European government debt (the entire periphery of the EU, including the United Kingdom) that our team anticipated for this timeframe (see GEAB N°50 ), will only exacerbate the event. Moreover, it is highly significant that PIMCO the world’s largest bond fund manager decided, at the end of February 2011, to liquidate its US Treasury Bond holdings. And that was before the disaster in Japan (6)!

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sad story

It is a sad story.  I know this kind of problem is coming.  I am not sure when.  Even with the new crop of repubs elected in 2010 the fed gov is unable to come even close to controlling spending.  As crazy as it is, I suppose the best we can hope for is the fed res keeps buying the debt.  Of course that is unsustainable.  The other hope is the 2012 election will change things and then maybe we can get spending under control but I have to tell you I am not so sure it will happen then either.  We do seem to be living in interesting times...

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re: sad story

ds,

You keep holding out hope that somehow the Republicans can save us.  I think it was Einstein that said that one definition of insanity is doing the same thing over and over and expecting different results.  There is no fix and inertia will keep us on this course long after we have reached the point of no return ( which I personally think we have already passed ). 

At this point the best hope is to educate the next generation that will come an pick up the pieces of our economic and political systems and hope that they don't make the same mistakes that we already have.  It reminds me of this dispair.com poster.

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Johnny Oxygen
Johnny Oxygen wrote:

http://www.marketoracle.co.uk/Article27004.html

With Japan and the Gulf States alone accounting for 25% of the total 4.4 trillion USD of US federal debt (December 2010), LEAP/E2020 believes that this new situation which is asserting itself during the first quarter of 2011, against a background of China’s increasing reluctance (holding 20% of US Treasury Bonds) to continue to invest in US government debt (4), carries the seeds for the collapse of the US Treasury Bond market in the second half of 2011, a market that now has only a single buyer: the US Federal Reserve (5).

JO,

I could be wrong but I think in the past you have said you supported government debt-free money creation ( ala Ellen Brown / Byron Dale ).  If it was not you, then I am asking this question to supporters of this concept. 

With interest rates basically at zero and the FED becoming the only buyer of our debt, how is this significantly different than what wealth money supporters want?   The FED will continue to roll all the expiring treasury debt and also at some point finance all future deficits with more QE.  Other than the shrinking interest rate spread between treasuries and free FED money, why is this condition hyper-inflationary but calling the money "wealth money" and having the government spend it it existence, somehow creates monetary nirvana?

Can someone explain the big difference?

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Neither
goes211 wrote:

You keep holding out hope that somehow the Republicans can save us.  

Neither rain nor snow, nor Repub nor Dem, can keep us from our appointed rounds...with What's Coming Next.

That's right, not even Ron Paul.

1 Man's Opinion (or 1MO)...

Viva -- Sager

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Japan Can Print, Can't They?

One thing that I didn't understand contained in Dr. M's alert, and was also alluded to in the title of this thread, is the assumption that Japan is going to be "short on cash" and the ramifications thereof. As they have demonstrated so clearly over the last decade, Japan can print money-credit at will to fund their reconstruction. I just don't see how these "dots connect". What am I missing?

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Ditto
SagerXX wrote:
goes211 wrote:

You keep holding out hope that somehow the Republicans can save us.  

Neither rain nor snow, nor Repub nor Dem, can keep us from our appointed rounds...with What's Coming Next.

That's right, not even Ron Paul.

1 Man's Opinion (or 1MO)...

Viva -- Sager

Make that 2 please. Well said.

 

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Hey goes!I'm not quite sure

Hey goes!

I'm not quite sure I understand the question. What is your definition of "wealth money"?

With interest rates basically at zero and the FED becoming the only buyer of our debt, how is this significantly different than what wealth money supporters want?

My gut response is this.

In a non usury issuance of currency the borrower still has to qualify for the loan. Meaning the loan has to be seen as having value and must be backed by some collateral and must be paid back. It also means that the person loaning the money must actually have the money either in assets or capital. They cannot create it out of thin air.

This means that ultimately assets, capital, 'money', must be created from production not a wave of the hand. That is not the case with our current situation. We are just throwing non production backed money at more non production backed money.

Am I addressing your question or have I missed something?

 

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Johnny Oxygen, What goes211

Johnny Oxygen,

What goes211 does not understand is the difference between money that is spent into circulation vs money that is borrowed into circulation.  Interest bearing debt money and non-interest bearing debt money is still debt money.  Money that is spent into exsistance (wealth money) has no debt incurred with its issuance and obviously does not bear any interest. 

Wealth Money supporters want debt free money spent (not loaned) into exsistance for the benifit of society as a payment for production done.

 

The only people that are against debt free money is the bankers or the people who have foolishly been tricked by the bankers lies that all money has to be borrowed into exisistance and that having money created as a payment would somehow destroy the country.....

 

All one has to do is look around and realize that the only way out of a destructive debt money system is to create money without debt in a manner that benifits everyone.

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Wealth Money
Thomas Hedin wrote:

What goes211 does not understand is the difference between money that is spent into circulation vs money that is borrowed into circulation.  Interest bearing debt money and non-interest bearing debt money is still debt money.  Money that is spent into exsistance (wealth money) has no debt incurred with its issuance and obviously does not bear any interest. 

You are correct that if the interest rate was zero, it would still be debt money because at some point in the future the debt repayment would destroy that money.  However you ignore the fact that if the government/FED decided to monetize ALL debt issues because there were no buyers and they were paying no interest, the extiguished debt would just be rolled over and reissued.  The government would effectively payoff the expiring debt with more new debt, which is really no difference than wealth money.  This is why wealth money supporters like Ellen Brown support the FED's current QE2 actions to finance our deficit.

To show that their is no difference imagine the government monetizing interest free debt with 100 year terms,  How about 1000 year terms?  How would this money be any differently than wealth money?

Thomas Hedin wrote:

The only people that are against debt free money is the bankers or the people who have foolishly been tricked by the bankers lies that all money has to be borrowed into exisistance and that having money created as a payment would somehow destroy the country.....

You forgot about those that know a little history of paper money.

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To show that their is no

To show that their is no difference imagine the government monetizing interest free debt with 100 year terms,  How about 1000 year terms?  How would this money be any differently than wealth money?

This proves my point that Goes211 does not understand the difference between debt free (wealth money) and debt money.  The difference is you're still in debt.  My guess is you don't want to understand, nor do you want anyone else to understand.

 

You forgot about those that know a little history of paper money.

I forget about those people that never address the fact that throughout all of history, all paper money has been debt money.  Its never been an honest money not because it was paper but because all paper money represented debt and was never printed as a final payment.

 

 

The government would effectively payoff the expiring debt with more new debt, which is really no difference than wealth money

It's sad when the american educational system pumps out people to work in the financial industry who cannot understand the difference of I own vs I owe.  Debt vs Wealth.....Slave money vs freedom money.....

 

Why are you so dead on destroying our nation by defending this absolutely fraudulent debt money system?  Is it really because you are connected to the financial industry?  Is foolish pride in your chosen carrer path really worth the destuction of your country, your future, and an unimaginable misery for the next gerneration really worth it?  Is there anything more important to you that profits for the banking system?

 

P.S.  I don't follow Ellen Brown.

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Difference with Wealth Money are ....?
Thomas Hedin wrote:

To show that their is no difference imagine the government monetizing interest free debt with 100 year terms,  How about 1000 year terms?  How would this money be any differently than wealth money?

This proves my point that Goes211 does not understand the difference between debt free (wealth money) and debt money.  The difference is you're still in debt.  My guess is you don't want to understand, nor do you want anyone else to understand.

I can't say this any slower but maybe you can try and read what I am saying slower.  What you call "wealth money" is equivalent to interest free, infinite term "debt money".  If you disagree, please explain why and try not to resort to silly slogans like "I owe vs. I own".

Since interest rates are approaching zero, we are nearing one of the two attributes to required for "wealth money" .  While we currently don't have the second attribute, what we may end up getting under a system of perpetual QE is not much different than infinite term debt.  If all debt is rolled over interest free via QE, what we get is machanically little different than interest free, infinite term debt money.  I believe this is why Ellen Brown effectively supports QE2.

Thomas Hedin wrote:

The government would effectively payoff the expiring debt with more new debt, which is really no difference than wealth money

It's sad when the american educational system pumps out people to work in the financial industry who cannot understand the difference of I own vs I owe.  Debt vs Wealth.....Slave money vs freedom money.....

Why are you so dead on destroying our nation by defending this absolutely fraudulent debt money system?  Is it really because you are connected to the financial industry?  Is foolish pride in your chosen carrer path really worth the destuction of your country, your future, and an unimaginable misery for the next gerneration really worth it?  Is there anything more important to you that profits for the banking system?

Disparaging the intentions of those you disagree with is unlikely to change many hearts and minds.

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What you call "wealth money"

What you call "wealth money" is equivalent to interest free, infinite term "debt money".

Can I say this any slower?.?.?.?....Wealth Money is debt free.......

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Infinite term debt
Thomas Hedin wrote:

What you call "wealth money" is equivalent to interest free, infinite term "debt money".

Can I say this any slower?.?.?.?....Wealth Money is debt free.......

Yes I claim that "Interest-free, INFINITE TERM, Debt Money = Wealth Money"

Mathematically

f(x) is interest free debt money

x is term of debt

L is Wealth Money

I claim that as x (the term of the debt) approaches c = ∞, Interest Free Debt Money = Wealth Money

You seem to be hung up on the word debt.  I assume you understand what a short term debt is.  I also assume you understand what a long term debt is.  Now imagine an infinite term debt and explain how it is functionally different than what you propose?

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Japanese Fallout May Hit Treasuries

 

Something I don't understand is that the LEAP article asserts that QE3 will now be impossible, while the blog cited says the Fed will have to buy all the debt.  That sounds like a clear disagreement to me.  Am I missing something?

From the Obama administration's point of view, I think the thing to do is for the Fed to buy all the debt and create a rip-roaring inflation.  That will decimate Obama's enemies (old white people with savings accounts and bonds), while giving him the money he needs to continue to buy the support of the unions and his already captive industries (GE, GM, etc.).   The Japanese problem will give the Fed a lot of cover for additional QE.  They can even let rates rise a bit, giving them an appearance of tightening. 

So, I've got to go with the blogspot on this one.  QE3 looks more likely, not less likely.

If Congress fails to increase the debt ceiling, I think Obama will wait a bit to give the people a good view of the consequences, then he will declare an emergency and ignore the ceiling.  He seems to do pretty much what he wants without paying much attention to Congress or the courts.

 

 

 

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Maybe I can help...

I think the important point of contention with money definition can be cleared up.

Debt money MUST be paid back at some point, with or without interest, and that event, the payback DESTROYS the money. It is back at the Bank and effectively no longer exists.

Non debt money, (May I call it "issued money"?) is issued for all transactions and need not be recovered. It is spent into existence in numbers equal to the determined need to conduct transactions. For example the population numbers increase within the nation issuing the currency, so more money might be necessary to account for their potential transactions and prevent deflation, and conversely inflation.

Also money that is issued rather than lent into existence is OWNED by the bearer. For example we would not be conducting business with notes owned by the Federal Reserve, but notes issued by Congress and the Treasury. The money in my wallet is owned by someone else and I am forced to pay my government taxes to cover the cost of the term of lease on it. Because the money in my wallet continues to be lent into existence, I must suffer with inflation. The value of the labor I expended to earn the lent money is decreased over time by the increase in money supply.Why is the money supply always increasing? Well if I get you to agree that only I can create money, and then I lend you some, where will you get the money to pay me the interest? I shall have to print some more and lend it to you, again at the end of the term I shall have to print some more, and you shall borrow it to pay me....and thus the money supply increases. Debt based monetary systems are slavery in it's most gilt caged form.

What are the effects of the continous debt based money supply inflation? The longer I hold my "notes" the less they can purchase. An example might be if you had a $20 and an ounce of gold (worth $20) and buried them in your back yard 100 years ago. Dig them up today and what will $20 buy you? A couple hot dogs and sodas. An ounce of gold (that originally cost $20) will buy you the same as it did 100 years ago, or what is now the equivalent of $1400.

The net effect is that more and more productive assets must be pushed up the chain of lending to the ultimate lender, in our case the Fed. So how does one enslave every man woman and child in a nation without firing a shot? Convince the Government to use your form of money exclusively, and issue it as debt, so that it can never be repaid in full without incurring more loans.

Goes- I know you are way beyond what i have written here, I just wanted to leave something for others to chew on while I tried to get to the definition of money problem.

Best Wishes,

Jager06

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Hedin In The Wrong Direction
Thomas Hedin wrote:

Why are you so dead on destroying our nation by defending this absolutely fraudulent debt money system?  Is it really because you are connected to the financial industry?  Is foolish pride in your chosen carrer path really worth the destuction of your country, your future, and an unimaginable misery for the next gerneration really worth it?  Is there anything more important to you that profits for the banking system?

Sir

I believe he has a point that deserves honest debate and discussion. I, too, am confused about the distinctions or whether there is a distinction.

Furthermore, I feel you do him and yourself and all of us a disservice by going into speculative ad hominem that only serves to reduce your credibility. It certainly seems odd to me that you're saying some one individual in this community has the potential to destroy our nation by defending the current money system...

Here's another question for anyone to answer: What if the Fed decided to just forgive all the debts it has taken on, in what it advertises as a one-time "jubilee" (after making Congress promise to agree to certain rules and law changes, if any)? After all, the Fed only has to pay 6% interest to stockholders and it can do that by printing money... It already hands over certain interest payments received over to the Treasury, doesn't it? What would stop the Fed from engaging in an act of "charity"? Hmm... I wonder what the ramifications of what would be...

Poet

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Something I don't understand

Something I don't understand is that the LEAP article asserts that QE3 will now be impossible, while the blog cited says the Fed will have to buy all the debt.  That sounds like a clear disagreement to me.  Am I missing something?

My take on it is that the blog is just offering up differnt opinions.

IMO QE cannot stop or all the problems will rush back on us. In regards to the Fed saying they will stop QE...well it's just that. The will say they are going to stop but they won't. The money transfers are all electronic and if you want to do it quietly and secretly you can. The government and the markets are so opaque now it doesn't matter. And besides, who is going enforce it? The SEC? Nope.

I think from here on out its just give money to whomever 'requires' it. Soon I don't think there will even be any pretense to it. It will just become accepted just like our wars.

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Poet, You're correct this

Poet,

You're correct this does deserve honest debate.

 

Goes211 and I have a lot of history but it basically comes down to this.  Goes211 whole premise is that there is no diffence between debt money and debt free money.  If goes211 truely believed that then surely he not see any difference between having his paycheck spent to him vs loaned to him....  Could you imagine if you had to pay back all of your income back at the end of the year plus more (interest)?

Sadly this is exactly the case in America. All of our incomes are all based 100% on borrowed money.  Its all borrowed and its all drawing interest all the time, and when you pay the debt off at a bank that money is extinguished / destroyed.

I highly doubt anyone could talk Goes211 into having his employer loan him his paycheck to himself at interest where he would have to pay back more than he received at the end of the year.

 

 

What if the Fed decided to just forgive all the debts it has taken on, in what it advertises as a one-time "jubilee" (after making Congress promise to agree to certain rules and law changes, if any)?

Poet this is the case today.  Today the banking system never has to pay on its obligations.  It does not have to pay because the bankers were succesful on getting congress to change / enact laws that ensure the banking system never has to pay.  The banking system has enjoyed a "jubilee" of fraud and theft by deception for longer than any of us has been alive.  Today the Bankers are in control of government not the people.  They gain all this control over government by having a monopoly on the creation of money as interest bearing loans.  Through this monopoly they have corrupted our educational systems into never teaching the truth about money creation, the effects of interest, and the long term effects of huge trade deficites.

Byron Dale proved that the Banking system never has to make payment in Byron Dale vs Federal Reserve Bank of Minneapolis.

After all, the Fed only has to pay 6% interest to stockholders and it can do that by printing money... It already hands over certain interest payments received over to the Treasury, doesn't it?

The Federal Reserve Board has no ability to create money.  Its true that the Federal Reserve Banks hand over most of their "profits" to the U.S. Treasury but those profits can only come from someone's indebtiness to the banking system.  "The actual creation of money always involves an extention of credit by private commercial banks" Russel L. Munk General Counsel United States Treasury.

What would stop the Fed from engaging in an act of "charity"?

They may be doing a lot of this right now but no one can know for sure, not even congress because the fed refuses to disclose this information.

Its very obvious that the bankers do not care about this country, the people, the next generation, humanity, or anything else.  All they are concerned with is the "profits" which are all based on interest bearing debt.  Its true that they could give us an honest medium of exchange, but the very last thing I would do is expect anything besides pure greed and a complete lack of understanding for humanity.

 

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Still Peddling Snake Oil?

Thomas,

I can't believe you're still pushing your debt-free money illusions in this forum. After all the debates we had about this subject over the years, it's hard for me to accept your obvious marketing. If you want to continue in this effort, please answer one question for me:

If debt-free money is not extinguished, what happens to the money supply over the years, decades, and generations?

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If debt-free money is not

If debt-free money is not extinguished, what happens to the money supply over the years, decades, and generations?

It would stabalize the money supply without the need for the people to constantly go deeper and deeper into interest bearing debt because money is extinguished when loans are repaid at a bank.  The total outstanding debt right now is around 60 trillion with a money supply around 7 trillion.  We are fast approaching the point in time where the interest load at just 6% on the debt is going to be greater than the total combined consumer income of everyone in America.

Do you really believe we can continue to expand the debt forever?

 

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Never reading what I actually say...
Thomas Hedin wrote:

Goes211 and I have a lot of history but it basically comes down to this.  Goes211 whole premise is that there is no diffence between debt money and debt free money.  If goes211 truely believed that then surely he not see any difference between having his paycheck spent to him vs loaned to him....  Could you imagine if you had to pay back all of your income back at the end of the year plus more (interest)?

That is not what I said at all.  There are big differences between debt money and debt free money.  The biggest difference is who profits from it.  The banking system, and those closest to it, profit from debt money.  Government, and those closest to it, profit from what you call debt free money.  Neither of which are anything like a free market in money.

What I was actually pointing out, and Ellen Brown is at least honest enough to admit it, is that QE is very close to debt free money.  This is why Ellen Brown supports QE.  Notice, I did not say that QE is equal to debt free money.  In my thinking there are only two differences between what you call debt money and what you call debt free money.   They are:

  1. Interest.  Debt free money has no associated interest charges.
  2. Repayment.  Debt free money is not paid back and therefore not destroyed upon repayment.

Now lets look at what is happening under QE.  The interest rates are very nearly 0% and QE is being used to keep these rates very low.  This is not quite the same as meeting the first condition, but it is very close to it.  

Now lets look at the second condition.  At first blush, QE does not seem to be match this very well because at some point in the future, all QE money creation will be repaid and therefore destroyed.  However, what would a system of perpetual QE look like from a government or central bank perspective when the country in question is running perpetual massive budget deficits and is financing this via QE money creation? 

What if these deficits are financed 100% via QE purchases of 30 year bonds and the central bank is effectively the only buyer?  Suddenly this does not seem much different than criteria 2, so once again I ask "How is this situation much different than that of the wealth money you advocate?"

As for your paycheck analogy, I don't see what you are getting at.  Someone somewhere might have paid interest to create that money in the first place, but all that matters to the employee is what purchasing power they receive.

I will say this one more time, just in case you are still listening.  I don't want a debt based monetary system.  I don't want a debt free monetary system.  I don't even want a PM based system.  What I want is a system based upon free choice and non-coercion.  I really don't know what that system would look like.  My guess is that there would be several different competing systems and that the resulting instability would act as a check on growth.  Deep down I really don't think any monetary system is built to last because they all seem be based upon an illusion.

Of the proposals I am aware of, I think Paul Grignon's digital coin is the closest to my preference.  It is not perfect and really don't like the concept of a centralized clearing house, but maybe if this system was just one of many, it might be ok.

I am really open to other proposals it's just that in my opinion government issued fiat currency, backed only by legal tender laws and controlled by congress would probably make building nuclear reactors on the Japanese shore line, look like a good idea.

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Goes211,   Would you be

Goes211,

 

Would you be open to a phone conversation?

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To what end?
Thomas Hedin wrote:

Goes211,

 

Would you be open to a phone conversation?

Thomas,

You might not remember but I had two different calls with you on this issue over the past couple years.  One time it was you, Larry, Byron, and someone else on your call-in internet radio show where I was the lone dissenter.  The other time was most of the the same crowd plus Damon Vrabel.  At this point I really don't know what one more call can accomplish. 

I do miss Damon.  In my opinion, the mere fact that he agreed with some of your beliefs raised your credibility, just not enough for me to change my beliefs.  Unfortunately he seems to have gone silent.  I also like Byron and I think he is a very sincere guy. 

It seems to me that wealth money supporters come down to two camps.  The first camp is statists like Stephen Zarlinga, Ellen Brown, Dennis Kucinich, ... that believe that centralized state control of money is desirable and will bring on some kind of nirvana where money is only used for the public good, whatever that is determined to be.  The second camp (made up of Bill Still, Byron Dale, Damon Vrabel,...) are not statists and seem to believe that wealth money created and controlled by governments will not lead to consolidation of power and authoritarianism.  I just happen to believe this is painfully naive.  There is no way that kind of power can be concentrated, backed by guns and legal tender laws, and not be abused.  Look at what is happening to the guy that was creating silver coins.  As Ron Paul says "Don't Steal,The Government Hates Competition."

You still have not answered my question.  What is the difference between debt money and wealth money other than...

  1. Interest.  Debt free money has no associated interest charges.
  2. Repayment.  Debt free money is not paid back and therefore not destroyed upon repayment.

Is there another difference that I am missing?  If not then I am still wondering what is the real difference between a government that rolls over all its debt and spending using a combination of ZIRP and QE and what you call wealth money?

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Stabilize?
Thomas Hedin wrote:

If debt-free money is not extinguished, what happens to the money supply over the years, decades, and generations?

It would stabalize the money supply without the need for the people to constantly go deeper and deeper into interest bearing debt because money is extinguished when loans are repaid at a bank.  

If by "stabilize" you mean "grow exponentially", then I would agree.

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Not just the debt...

Another aspect of the monopoly game is labor. This has been a blind spot for me...lately, it is very clear.

It is so very interesting how an economic model that uses labor to calculate wage, whatever the currency, could ignore a women's labor as mother. Industrial growth coupled with debt/currency allowed men and women to be able to create great wealth, not from actual physical labor, but from money games and by using the labor of others...it is an unnatural monopoly. The mother's labor is work that does not have rewards in a paid wage.  Gradually women/mothers needed a wage because of competitive growth...and this led to a mother's true labor, not only childbirth...also childcare, being negated. Cleverly acting as if mothers were liberated from labor by medically blocking the pain of childbirth. Fathers lost the pride of providing for their families through honest labor. Now the children need to go to daycare so mom can work too. Both parents are frustrated by flatterers telling them their child's needs are being taken care of. Would a lioness leave her cubs with a penguin for the day? Individuals are very differnent from each other....in fact, humans differ more than animals differ...but we are often fooled because we can flatter each other with words and promises, no matter the truth.

Real physical labor creates health and sustainability(true wealth). A currency or model that pays non-labor jobs, like bankers, more than a laborious job like a janitor...will make humanity act as a virus. Expectation rules outcome.

The janitor is bearing real risk to life...while the banker is sitting back making money, able to access resources, with no physical toil or risk to life. The banker not only earns more money for less labor, but also gets the office toilet cleaned by the janitor!

Each individual has a relationship with the land and resources. Individuals who seek to avoid physical labor in exchange for a wage create an unnatural ability for other men and women to deny the value of labor for survival. Any currency that rewards delusional labor will arrive at the same wealth gap and dependency.

Labor represents birth/creation/life...work is love made visible. The love-work a mother provides for her child should not need to be outsourced for survival of the child...that is truly absurd...and makes it possible for all humanity to be reduced to a tool for delusional profit.

 

-littleone

 

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