Discussion has been on debt, but I would appreciate a discussion on the
interest and the impact to the monetary system. Lets say debt of $100,000 is
created at 8% interest over 20 years. A $100,000 of interest will have to be
paid also. Doesn't this mean that only a $100,000 is placed in circulation
whereas $200,000 has to be repaid? Where does the other $100,000 come from?
As someone stated, if all debt would be repaid, there would be no money
left. Doesn't this means that when all the money is paid back, only 50% of
the debt is paid.

Gerald Steen
Program  Manager, retired
E-System Raytheon
[log in to unmask]

----- Original Message -----
From: "Dirk Johnson" <[log in to unmask]>
To: <[log in to unmask]>
Sent: Wednesday, December 27, 2000 11:19 AM
Subject: Re: value / money / debt


> When the Fed buys a government security (i.e., lends money to the
government
> -- public debt) or lends to a member bank (for the purpose of increasing
> that bank's fractional reserve so that bank can make loans) throught the
> discount window (private debt), money is created.  This money is not even
> printed until it becomes a currency demand (you go to an ATM).  It simply
> exists as computer entries.
>
> When the Fed sells government securities (redeems public debt) or is paid
> back by a member bank, money is destroyed (i.e., the computer entries are
> "balanced" -- deleted).
>
> All money (a concept that includes "all currency" but which exceeds "all
> currency") in circulation results from the Fed buying securities (lending
to
> the government) and lending to banks (to individuals and corporations).
The
> "reserve" of "fractional reserve" is really simply an obligation to pay
the
> Fed.  That is what I meant by debt.  The money does not exist until
someone
> owes it (either the taxpayers or a borrower).  The money cannot be
redeemed
> by the issuer in gold or silver or platinum or even oil or toothpaste.  It
> only exists as somebody's promise to pay.
>
> Look at a dollar bill.  Notice that it's called a "Federal Reserve Note".
A
> "Note" is by definition a redeemable instrument, but if you send a dollar
to
> the Fed and ask them to redeem it, you'll be lucky if they send you four
> quarters (lucky because a quarter at least has SOME value), but they'll
more
> likely just tell you to get lost, because there IS nothing with which to
> redeem it, except someone else's debt, which will be paid in Federal
Reserve
> Notes of equal value to the one you possess - someone else's promise to
pay.
>
> Of course, banks make profits on ALL of these transactions.  And when the
> banks go belly-up, we the people give them even more money.  Jim X knew
the
> score.
>
> Dirk Johnson
>
> -----Original Message-----
> From: Tim Romano [mailto:[log in to unmask]]
> Sent: Wednesday, December 27, 2000 4:24 AM
> To: [log in to unmask]
> Subject: Re: value / money / debt
>
>
> What is "debt"?
> Tim Romano
>
>
> DIrk Johnson wrote:
>
> [...]    The entire U.S. (and European) system
> is based upon debt, not value.  If all debt were paid, under the current
> system of banking, there would be no money at all.
>
> The money is created from debt and then used as a "reserve" to create
> further debt under a fictitious fractional reserve (fictitious because the
> reserve doesn't actually exist except as previous debt), which in turn is
> used as a reserve upon which fractional loans and so forth again and again
> up to, if memory serves me, 23 times, when it exhausts itself.  Of course,
> new debt is simply issued by the government (bonds, bills, notes) and new
> money is printed to buy it and the whole shebang starts again.  Banks
charge
> interest on all of it. [...]