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money and debt in today's environment ...Views: 580
Mar 18, 2010 5:24 pmmoney and debt in today's environment ...#

James Booth
.
Early this morning one of the men told me about his trip to American Lake VA Hospital, and in passing, he mentioned that he was told by his counsellor the VA is "gearing up" to pay out more in benefits for exposure to Agent Orange in Southeast Asia, including those who had tours in South Korea.

This man had two tours in SK, was a "financial" officer in the Army, and later a professional trader, until his life crashed around him.

Mention of Agent Orange benefits was a trigger for me, an opening I had been waiting for, because I thought to myself that if I told this man what I really thought, "He will tear me apart, turn my head around. That would be good because even if I do not agree with all he says, I will know that what he tells me I need to give my attention to. I can learn something from him."

So I began, "You know, what the VA is doing ... I think it can be argued there is no money - we have these worthless paper IOUs - and it can be argued there is no debt. You know, we hear talk all the time about this massive *debt* we are passing on to our grandchildren and the next generation after them ... but there IS no debt."

Clearly I had his attention at that point, so I continued.

"Let's say you decide to start a business ..."

"I wouldn't start a business right now," he came right back.

"Let's just say you decide to start a business," I went on, "and your business is extending credit to your customers. Your customers come to you thinking they are borrowing money from you, but that is not what is really happening. They think they are signing a loan agreement, you know, just like you and I were brought up to think things worked, and they have to pay you back ... but the truth is, you do not care whether they ever pay you back. What you CARE about is their ability to pay, and you CARE about those monthly payments they are going to make to you. You are not giving them anything anyway, except the "opportunity" to go out and buy things. In fact, if they want to "borrow" more, so much the better for you because that means those monthly payments they make to you keep getting bigger. There never was any intention of paying off all this debt."

He was looking right at me, eyes wide open, as I continued, "VA benefits for Agent Orange, or for PTSD; appropriations for health care - its the same as for public works projects way back in Greece. The ruling power borrowing from the Money Power to finance these projects ... elevates the ruler, makes the people feel special. Apply that to our federal government today, and that is just what is happening. There IS no debt - just the rental payments on what has been "authorized" - appropriated by "government" ..."

At that point I was not quite done, but he interrupted me.

"You've got it figured out," was all he said, and I could tell me meant it.


It just blows me away.

Later, after giving my boss her morning update, I told her that what was on my mind really had nothing to do with the House.

I mentioned the conversation I had with the "trader" and about VA benefits for Agent Orange, which was relevant, and she is often curious about what I will come up with next, so, without mentioning I had already done this once this morning, I continued into a slightly different version of "I think it can be argued there is no money ... "

One difference, since she is a Catholic nun, is that I included Christ: "What was the one thing Christ got mad about?" I asked.

She mentioned something that came to her mind, and I agreed, but pointed out, "Yes, but there was an element of violence when Christ overturned the money changers tables. That was kind of out of character for him, wasn't it?"

She agreed, and this woman is no fool, knows more about running a business than a lot of people would still like to know.

She has Master's degree and is not timid at all about telling you if you are "full of it"

... but she sat there with a growing smile, nodding her head more and more, until I finished.

Then she said, "You don't seem to want to believe that, do you?"

"NO!" I said. "Of course I do not want to believe it! I was raised to think I lived in a country that had certain rules, where people acted in certain ways, felt responsibilities and obligations ... but I can't seem to find that place any more. No! I don't want to believe any of this!"

So for a second time in two hours this morning, my "theory" was confirmed, and by people whose opinions I value.

It just blows me away !


JB

Private Reply to James Booth

Mar 18, 2010 9:25 pmre: money and debt in today's environment ...#

John Stephen Veitch
James, you write:
"The ruling power borrowing from the Money Power to finance these projects ... elevates the ruler, makes the people feel special."

Creating "money" is authorising an obligation between partners. Calling it "debt" or not doesn't change the situation. The obligation to meet the commitment is what gives "money" value. If the debt carried no obligation to supply goods or to make repayments the "money" would be valueless.

In the short quote above you capture something very ancient, which is still present in modern banking.

I think of African villages, where once a week people sit for hours in the hot sun waiting for an audience with the village Chief. They each get a few minutes to ask for something, and the village chief usually offers them some small "gift" to help in their situation. What's going on here?

The villagers are acknowledging the power and authority of the village Chief. The Chief is exercising his power and authority, and making the village more unified and probably more prosperous. At the same time he is creating a channel through which obligations to do work, or to pay tribute flow back to him.

Think about the Mafia, in the USA. Local people would go to the Don, and ask for favours. The Don has a reputation for being very generous. He gives money away easily. BUT, he asks for an obligation in return, and that obligation is very strictly enforced.

The banks and the government together perform this same function. You go to you bank, cap in hand, asking (begging) for a loan. If you get it you are overjoyed, because now you can buy your house or the new car or invest in your business. But there is an obligation to repay, which keeps you chained to the economy, keeps you working, keeps you busy supporting the system.

So that's what happens. It's not evil, unless power is abused. Sadly power is almost always abused, and the people "in the system" try to cover up the abuse, or are unable to even recognise the abuse occurring.

Easy examples:
Sexual abuse in the Roman Catholic Church.
Excessive rates of imprisonment.
Fraud in the housing market.
The fraudulent failure of retirement savings schemes.
The provision of "free education" to military volunteers.

John Stephen Veitch; The Network Ambassador
Open Future Limited - http://www.openfuture.co.nz/
Innovation Network - http://veech-network.ryze.com/
Building an Open Future - http://openfuture-network.ryze.com/

Private Reply to John Stephen Veitch

Mar 19, 2010 4:58 amre: re: money and debt in today's environment ...#

Ken Hilving
There is another aspect to this obligation, the real or implied "or else" that sets the stage for abuse. The stronger the threat of "or else", the greater the abuse.

Ironically, the obligation is a natural response in most people. We like to keep the "books" balanced, to give at least as much as receive.

Private Reply to Ken Hilving

Mar 19, 2010 5:35 ammoney and debt in today's environment ...#

Mike Fesler BizHarmony
Hopefully. . . . .

Someday, just maybe . . .

it will be worth the wait. . . . .

The wait for worth.

M.

Private Reply to Mike Fesler BizHarmony

Mar 27, 2010 7:15 pmre: money and debt in today's environment ...#

James Booth
.
"The obligation to meet the commitment is what gives "money" value" is much the same as Quigley's initial description of money in "Tragedy and Hope"
... yet it does not describe all money.

There IS another kind of money which has value of its own: an example in "Progress and Poverty" mentioned in Henry George's introductory argument that "demonetization of silver" has been offered as one cause of economic depression reminds us of what was.

It is not in our experience today to have in our hand, most of us, *real money* - that is, a coin which has its own worth in weight of metal.

Not in our lifetime have we been able to dig silver, or gold, from the ground and take it to the Mint, which we paid for as a people, and have it "coined" - stamped into coin - for use by our friends and neighbours and people we do not even know, as well as ourselves.

What we use today is all "debt-money" - money created in the act of authorizing indebtedness: that is, our signature on a "loan" document, or our promise to pay, or our government's promise to pay

... and yes, that "promise" DOES give our current, otherwise worthless, money, "value".


"If the debt carried no obligation to supply goods or to make repayments the "money" would be valueless"
... applies when "money" is debt-based, but not when money is "real" - that is, has value of its own.

If you have a 1922 United States Quarter in your hand today, you CAN purchase the same as that coin would have purchased in 1922, although obviously if that coin is accepted at "face" value you cannot.

Except that no Standing Liberty Quarters were issued in 1922.

What *cost* twenty five cents in 1921 or 1923 costs a good amount more today, in terms of current U. S. Dollars, but the VALUE of a 1921 or 1923 Standing Liberty Quarter in average condition is more today (due to scarcity) than the value of what it would buy when the coin was issued; therefore, the *exchange in value* remains essentially the same in that you could purchase the same product or service today with the same coin, because the coin itself retains *value* above and beyond its *face value*.

What has changed is the *value* of the 2010 U. S. Quarter itself, which has so little metal content *of value* as to be essentially "worthless" - at least as compared to the Silver Quarter.

If the argument is that the same coin is "worth" only face value, then it may hold up to say "The obligation to meet the commitment is what gives "money" value"; however, what once was *money* - a 1920s issue Standing Liberty Quarter - is, or can be considered to be, STILL money, in that it can be used to satisfy an exchange, a transaction between two individuals or between an individual and a business.
_


"The villagers are acknowledging the power and authority of the village Chief.
The Chief is exercising his power and authority, and making the village more
unified and probably more prosperous. At the same time he is creating a channel
through which obligations to do work, or to pay tribute flow back to him."

The "Chief" does not long occupy his position without the consent of The People, which consent "regulates" the "power and authority" of the Chief.

The Chief may serve as "judge and jury" to arbitrate disputes, yet within limitations of "fairness" judged by The People.

Therefore "unity" is not a one-way operation, but is a mutual act of Chief and People.

However much "unity" a Chief may decide to impose, a People who are not spiritually happy will not be prosperous.

That a Chief exacts some "tribute" for his service of "power and authority" does not preclude that same Chief sharing such "tribute" with those of The People who are unable to provide for themselves - as long as Chief has no cause to *sanction* such individuals.

The same is true of Mafia, yes, and that an "obligation is very strictly enforced" is reasonable in that milieu the same as it is reasonable to expect that all Americans abide by Rule of Law within the framework of the Constitution; otherwise there would be no Mafia nor village "power and authority" resting in any Chief, although Mafia "enforcement" may be somewhat excessive at times.


Extending that "logic" to saying, "The banks and the government together perform this same function..." I find a bit of a stretch.

In the village setting, an individual possesses livestock or produce, whether gathered, grown or hand-made, or possibly right to a portion of land, and it is possible that an individual may consent to some "service" in exchange for a loan of definite period, such as seed to grow a crop in exchange for committing a portion of the crop as "tribute" and / or repayment, either to the Chief or to someone else in the village.

Mafia "enforcement" does not leave the same room for an individual to transact (perhaps even to exist) as does the village Chief, although the Mafia is much more open about "consequences" of transacting within its "jurisdiction" if we can call it that.

The relationship between "banks" under a central bank and "government" is anything BUT "open" as regards consequences of individuals transacting within such a system.

As with the village Chief or Mafia Dons, there is *selectivity* (some are favoured, others not) under a central banking scheme, but rather than "skimming" off the top, the central bank has hidden, and more devious, ways of extracting its "tribute" - the moreso as "government" is increasingly beholden to the central bank.

Unlike both the village and Mafia settings, which in both cases allow "repayment" to be made in a variety of ways (more kinds of "money"), the central bank scheme limits transactions to only ONE kind of money, which is created and emitted BY the central bank, "legitimized" by government "legislation" so as to make it seem part of government, even when it is not.

Imagine Mafia being characterized as relatively honest ?


"... asking (begging) for a loan" is no good unless one can demonstrate *ability* to pay: *need* is not enough.

Home "ownership" or business success comes sooner, at much lower cost, WITHOUT any "obligation to repay" and while such "ownership" may not keep a person "chained" to the economy, it does represent a vested interest in the economy, and in both cases one is kept working and "busy supporting the system" without destructive "taxation" except for the inevitable losses due to inflation (a hidden tax) - the constant devaluation of a fiat currency - or perhaps kept working *because* of that devaluation.

Nothing is necessarily evil "unless power is abused" - yet a "debt-based" economy is itself abuse of power in that "hidden taxes" constantly diminish any *wealth* an individual who works (and transacts) honestly - within prescribed limits of the system - can hope to accumulate.


JB

Private Reply to James Booth

Mar 29, 2010 9:39 pmre: re: money and debt in today's environment ...#

Ken Hilving
I don't think the issue is money or debt. This is a perception issue based on our cultural focus on money as the exchange.

With the start of the Industrial Revolution, we have dramatically shifted from human labor to machine labor. This has reduced costs, increased availablility, improved quality, and generally offered us the opportunity of the highest standard of living humanity has ever known.

Unfortunately, our distribution method has been based on exchanging human labor for money (jobs), and money for goods and services. In just a few short generations we have made the jobs nearly obsolete, but we are still tied to money as our distribution mechanism.

Forget all the bull about lazy people, parasites, and socialism. The vast majority of people out of work are quite willing to work, but the jobs aren't there. Our global production has advanced in all areas to where the human involvement is no longer crucial. This is fantastic, except without work the majority of people cannot participate in the bounty.

This is a fundamental shift in the entire concept of human life. It changes the entire definition of human values, both in how we assess others and how we assess our self worth.

It may be a shift we are unable to handle.

Private Reply to Ken Hilving

Mar 30, 2010 2:51 amre: re: re: money and debt in today's environment ...#

Thomas Holford
Ken Hilving sayeth:

> Forget all the bull about lazy people, parasites, and socialism. The vast majority of people out of work are quite willing to work, but the jobs aren't there. Our global production has advanced in all areas to where the human involvement is no longer crucial. This is fantastic, except without work the majority of people cannot participate in the bounty.


An interesting analysis.

The definition of a "free market" is that it is self-clearing. That is, it efficiently balances supply and demand.

The fact that the market for labor is not "clearing" at this point in time says that the market is not efficient.

The relevant question is: what is the nature of the inefficiency and what can be done about it?

Obviously, there is available labor going unused.

The balancing question is: are there corresponding requirements for labor that are going unfulfilled? Or, put another way, are there needs for goods and services going unfullfilled that could be supplied by the application of labor?

I think the vast majority of people would certainly answer that there are goods and services they would like to have, but can't for a variety of reasons: affordability, availability, legality, etc. etc.

Bottom line: available labor, unfulfilled demands. Why isn't the free market doing its magic?

My answer after others have commented.

T. Holford

Private Reply to Thomas Holford

Mar 30, 2010 3:42 pmre: re: re: re: money and debt in today's environment ...#

Ken Hilving
The balance of supply and demand has self-cleared. The problem is with the change in supply.

The market has failed because the "lubricant" distribution has stopped with the change in supply, and is now pooled. The failure is because the supply source was also the lubricant distribution method.

The best solution would seem to be one that retains full advantage of the supply change through a new distribution method or a new lubricant.

The alternative is the same as with any machinery. Remove the lubrication and friction will cause catastrophic failure.

Private Reply to Ken Hilving

Mar 30, 2010 6:26 pmre: re: re: re: re: money and debt in today's environment ...#

Thomas Holford
Ken Hilving sayeth:

> The market has failed because the "lubricant" distribution has stopped with the change in supply, and is now pooled. The failure is because the supply source was also the lubricant distribution method.

> The best solution would seem to be one that retains full advantage of the supply change through a new distribution method or a new lubricant.


You lost me.

I don't know what to make of this.

T. Holford

Private Reply to Thomas Holford

Apr 03, 2010 6:44 pmre: re: money and debt in today's environment ...#

James Booth
.
"I don't think the issue is money or debt."

This thread was not begun to raise, or to deal with, any particular "issue"
- other than perhaps the "issuance" of money as debt.

So-called *debt-money* is not the only kind of money we have available to us, for our personal use, for our interactions on any level of "society" (however society may be defined); however, in related threads in this forum, it has been suggested that ALL money represents, or authorizes, an "obligation" - whereas I believe there are forms of *real money* which SATISFY obligations BECAUSE such *real money* IS itself a form of *wealth* - that is, a tradeable commodity wholly different from the IOU form of "money" made legal in most of our societies today.

That distinction is not a "perception issue" (not a response to the "cultural focus" comment), but a fact.

Gold, silver, copper - metals - have to be dug from the earth and refined (impurities removed), and may then be used for a variety of purposes; ie. gold dental filling, copper wire, silver dinnerware, etc., or any and all may be stamped into coin to be used for exchange purposes, again, to *satisfy* an obligation, same as delivering a measure of corn in trade for a specific quantity of coal *satisfies* both parties to the exchange.

In other words, both parties have been "paid in full" and there is not ongoing "debt" to be satisfied, no further "negotiation" needed.


On the other hand, *debt-money* is NEVER more than a *promise to pay* and any transaction involving *debt-money* must yet be satisfied with delivery of what is "promised" by the (fiat money) "note" which merely represents a commodity which is supposedly stored for "pickup" at some secure location, although truth be told, there is NEVER the full amount of *commodity* in such "storage" to satisfy the entire *obligation* represented by all the *notes* in circulation at any given time.

Since the total "value" of all *notes* can not, at any given time, be *satisfied* by delivery of the *commodity* for which those notes are issued as "receipts" for deposit (a characteristic failure of the *fractional reserve system* of banking), there must be some other means to ultimately *satisfy* transactions at such point where "confidence" in the system deteriorates enough so that depositors "run" to collect what is owed to them.

As people are often quick to point out, our current debt-money system has, for more than one generation, afforded most of us a vigorous lifestyle in that we are able to "borrow on demand" - according to our demonstrated ability to "repay" what we borrow (our perception), though more truly this system is based on our ability to deliver a monthly recurring "rental fee" for the use of that credit, as noted by our being cut off from "easy credit" NOT when we are unable to pay the principal, but when we are unable to make the "minimum monthly payment" on our account(s).

Inability to pay "interest only" is given as justification for our no longer being offered credit, and that may be one of the first clues opening our awareness that *principal owed* does not necessarily represent *debt* within this system, but that the system itself is merely a scheme to collect payments which serve only to maintain profitability of the system.

Of course, once an individual realizes that what he or she has "borrowed" never existed until the "borrower" signature *authorized* its existence - that, in fact, the bank has given NOTHING of substance but only a "promise to pay" - the fraud begins to emerge from behind the veil of secrecy banks and supporting "economists" work diligently to keep in place.

If anything, I would say "our cultural focus on money as the exchange" is ingrained in our thinking by the "legitimizing" of *money as debt* as the ONLY "legal tender" means of exchange "approved" by our government(s) while other forms of exchange are deeply discouraged through taxation and regulation, or unwanted legal entanglements along with smearing one's "good name" which often results from attempts to transact outside the system.
-


About three hundred years ago, according to Dr. Carroll Quigley in "Tragedy and Hope," the labour of twenty persons was required to produce food for 21 persons.

That situation began to change around 1725 with the Agricultural Revolution which freed up 17 of those labourers.

By 1775 the Industrial Revolution was absorbing that "excess" labour, which was shifting from rural areas into towns and cities which became industrial centers as "industry" evolved from individual or local manufacture toward assembly line operations.

That "excess" of labour has also given rise to the growth of "government" as governments have used "unemployment" statistics as justification "put people to work" - for which new agencies and bureaus must be created and appropriations authorized to support increased government payrolls, creating a new "class" of citizen beholden to government as "employer" and thus willing to vote for whoever in government was "benefactor" providing those jobs.

At the same time, as mentioned above, new technology continually provides *automation* which reduces need for *manpower* - both in government and private employment arenas - so that "unemployment" can never completely be eradicated.

What had promise to "free" humanity from poverty has ever since only served to increase poverty.

Automation improves our lifestyle as it reduces the need to labour to produce what we need, helps keep costs down and supply up, and can continually improve the quality of what is produced, although by design our "economy" is still based on "cyclical consumption" for which quality is more often sacrificed for the benefit of "future profits" (continued sales).

Beside wasting resources by producing products inferior to what automation could provide, resources continue to be wasted through "creating" jobs that do not NEED to be done - except to satisfy a desire to reduce unemployment.


Manufacturing a product designed to fail within a few years, thus "requiring" it to be replaced, when machinery is available to produce a similar product which might last the lifetime of the user, is an obvious example of waste of resources as replacement requires additional raw materials along with additional energy consumption, not to mention *time* humans could devote to more productive endeavours.

Perhaps less obvious is the creation of "jobs" which are not necessary for anyone's survival (IRS, "flipping" hamburgers, convincing "consumers" what they "need") but require enourmous expenditure of "personal wealth" for energy (oil and petroleum byproducts) and equipment to move individual workers from one place to another, and back again, along with "wear and tear" on infrastructure (roads and bridges) which requires additional "consumer" outlay.

Another "unseen" source of waste is energy and equipment for transporting raw materials long distances to "industry" and from there, in our "global" economy, additional long distances between manufacturer and consumer, with additional "handling" expenses along the way, which, when automated, consume even more "energy" extracted from whatever "inventory" Earth provides.

Yet these elements and more are *necessary* to our current *debt-based economy* which cannot be sustained except through continuous *growth* - growth which cannot be sustained at the current rate of our consumption, that rate already in some cases exceeding what Earth can supply.

We are just beginning to realize we have "advanced in all areas to where the human involvement is no longer crucial" and "the majority of people cannot participate in the bounty" provided by our current systems.


Are we waking up to the fact that our "current systems" are NOT designed to benefit the "most" of us ?

I hope so, because I agree that how we have come to "assess our self worth" in current society is too often tied to our "employment" which is most often restricted by our ability to transact freely with each other.

Employment today is more and more a political tool used to marginalize those who are deemed "out of line" while rewarding those who support Money Power and those "leaders" and "lawmakers" who serve to "legitimize" that power and its aims.

Whether we, today, are able to handle the inevitable shifts in our systems of money creation and emission, in the way we utilize our planet's resources, in how we value each other and the totality of humanity and Creation itself, matters little.

Two hundred, three, four, five hundred years from now, children will cry, take their first breath in this life, and then begin to learn how to operate in whatever economic system prevails at that time.

Name calling, demeaning commentary, and other divisive actions in the present day are little more that smug self-satisfaction for individuals who could otherwise devote their time and efforts to actually making something meaningful happen.

In the meantime, we may have to sink farther into economic slavery before it becomes so oppressive that we free ourselves to once again live freely to enjoy what Nature has provided for our sustenance, for our living.


JB

Private Reply to James Booth

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