Even more sobering than these questions does it follow that any economy
which is sustained by a currency which is based in interest-bearing debt
must ultimately and logically terminate itself under insoluble debt?

CDM

----------
>From: Gerald Steen <[log in to unmask]>
>To: [log in to unmask]
>Subject: Re: value / money / debt
>Date: Wed, Dec 27, 2000, 2:58 PM
>

> 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. [...]
>