The architects of our financial system invented the double-entry accounting system to ensure the perpetual need for debt. Even money itself originates as debt and must be entered on both the asset and liability sides of a balance sheet. Making debt essential was the cage to ensnare humanity. Interest was the key to lock the cage door. Interest would ensure that the issuers of debt could perpetually collect a private tax on the total value of all of the assets on earth. In a nutshell, these are the secrets of our debt-based monetary system.

Charging interest on loans makes it easy to convince people that too much debt is a bad thing. It also teaches them to expect that the amount of debt they can access will be limited by their income level. If you are rich, you can borrow a lot to become even richer. If you are poor, you are stuck with whatever meagre income you can earn from your own labour. This unequal access to money lays the foundation for capitalism.

The poor have few choices and must remain dependent on those who have capital. The poor cannot afford to invest in the education needed for a high paying job and must remain dependent on those offering minimum wage positions. The poor cannot afford to buy their own home and must remain dependent on those who offer rental housing. The rich, on the other hand, can rely on these disadvantages of the poor and capitalize on them. The rich can use borrowed money to exploit the productivity of minimum wage workers and make huge profits for themselves. The rich can use borrowed money and the rental income from their tenants to acquire apartment buildings and housing properties for themselves. By denying the poor access to capital, the rich can control markets and acquire fabulous wealth for themselves.

But with our double-entry accounting system, to say that too much debt is a bad thing also implies that too much wealth is a bad thing. Under our accounting system wealth and debt are simply opposite sides of the same coin. Wealth cannot be created without debt, and debt cannot be eliminated without destroying wealth. It is curious then that those who demonize debt never suggest whose wealth should be obliterated. To strive to limit the amount of wealth that society can produce by cultivating an exaggerated fear of debt is pure skullduggery. It is as ridiculous as saying that, although we have the human and natural resources necessary to produce new wealth, we simply can't afford to be any richer.

It is not the amount of debt itself that is the problem, it is the cost of servicing our debt that gets us into trouble. Interest payments rob income from people with too little wealth and reward people whose wealth is already more than adequate. If interest was abolished, people with too little wealth could afford to borrow to develop their potential and the artificial need for a planned scarcity of money would disappear.

Throughout history we have been warned repeatedly by presidents, popes and bankers alike that a privately-owned, interest-bearing, debt-based monetary system would enslave humanity, control governments and make a mockery of democracy. Our forefathers fought and died to free us from the grip of usury that the Bank of England used to control the colonies. Yet despite their ultimate sacrifice, early in the 20th century, the governments of North America simply gave away their sovereignty and the most precious right and sacred responsibility of any government, the right to create and control the currency and credit of a nation. One simple act of treason quietly returned the most precious power on earth to the private banking system.

If governments exercised their right to create interest-free credit for the nation, society could rebuild and enhance its infrastructure immediately. Without the burden of interest, the cost of restoring our national asset base of roads & highways, airports & seaports, schools & hospitals and government buildings & equipment, would never have to be repaid any faster than the rate at which the assets actually depreciated. Our double-entry accounting system requires it to be that way. To keep our assets and liabilities equal, we do need to pay down our debt as our assets wear out, but it is totally unnecessary to reduce our liabilities any faster than our assets depreciate. As long as the value of an asset exists, a corresponding liability must also exist. So if a public hospital was built to last 100 years, without interest payments, taxpayers would only need to pay back 1/100th of the cost of building the hospital each year. With interest payments however, taxpayers must pay the cost of building 2 or 3 hospitals before the loan is complete.

Under our current accounting system, balance sheet debt that is created to finance tangible, productive assets is necessary and not a bad thing. Debt created solely for speculative purposes or to fuel consumption, however, should be eliminated.

It's a great argument for stimulus but I would argue that the zero interest loan concept has been in place since the first bank bailouts began in 2008. Supposedly it first went to American banks and todays article at Zerohedge shows how QE2 has gone mostly to foreign banks.

Government seems to be keeping their corporate commitments to banks but threatens austerity measures on the general populace.

Because of these facts, I look at any proposed stimulus with great suspicion.

There is a new blog by HyperTiger that fills in some of the blanks as well...

http://hypertiger.blogspot.com/

Re: Ponzi_unit

Yes the solutions need to include more than just bank bailouts. See the Financial Party of Canada's new web site. http://www.financialParty.ca

The only "stimulus" that's going to work is to give money directly to the people for they will spend it where it should be spent, from the bottom up.

Giving it to banks and to government is just dumping it down a rathole. It just goes to offset paper debt by the banks, and further waste by the government. It will do nothing to improve the REAL economy.

Giving it to the people directly will allow it to flow to producers of goods and services that people really want, i.e. the real economy.

King Louie found out the hard way about what I just wrote. He was so distraught about it, he lost his head.

That doesn't work either Boz. "Giving" money to people simply dilutes the existing stock and the price level goes up and destroys the actual value of what you just did.

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The only "stimulus" that's going to work is to give money directly to the people for they will spend it where it should be spent, from the bottom up.

This just destroys purchasing power of savers and would create much quicker and more severe inflation that what they are presently doing. It would clear debts however allowing people to lever back up (bad, obviously but short term bubbles always feel good for the levered sheeple).

Printing money and handing it to anyone simply creates more systemic damage but it is politically convenient insofar as it can perpetuate or at least extend the ponzi credit growth.

The system Ben and Greenscam and the political elite are trying to perpetuate is one where people have two choices:

1. Sign up for, and admit to a lifetime of, debt slavery where nothing is ever 'owned' and there is never, ever any sort of 'getting ahead'. It simply doesn't EXIST.

or

2. Save your cash, desperately try to find an alternative that maintains value (and fail doing so) and essentially live "sans matrix".

The concept that money is something that is exchanged for goods and services is being destroyed by TPTB. By enforcing an inflation target, TPTB are forcing ALL OF US into doing X, Y and Z at very specific times. And they want things this way because it is ALL about nothing more than full control over hundreds of millions of souls (here).

Bernanke said the other week that he is 'fascinated by financial stability' or something to that effect. Do a search for "stability" in his speech and be prepared to wretch.

Note that Greenspan has apparently changed his mind of late.

Here it is:

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So I don't generally make recommendations about specifics, but I do think in my role as someone who's extremely interested in financial stability , that addressing the medium- to long-term deficit problem is -- is -- is very urgent.

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Wealth cannot be created without debt

I take exception to that statement. Over the last 11+ years, I've built a successful business and become "rich" without ever having taken on (or creating) any debt.

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and debt cannot be eliminated without destroying wealth

This assumes that money (and other paper assets) actually constitute wealth, a notion I disagree with. Actual wealth consists of tangible things like real estate, mines, office equipment, computers, appliances, tools, minerals, oil, power plants, factories, food, transportation infrastructure, etc, etc. However, money is not wealth; it is merely a claim on wealth.

What we have done over the past 30 or so years is emit large amounts of unbacked credit without allowing the normal business cycle to destroy those portions of it which were unsound. This has produced the illusion that we have considerably more wealth than we really do. In other words, there are more claims on wealth (money and other debt instruments) than there is actual wealth. There are only two possible ways in which this ugly situation can be resolved: The value of each of those claims can be reduced until the total value of all of them is approximately equal to the real wealth that actually exists, or some of those claims can be destroyed (written off), again until the total value of those which remain is in balance with the real wealth which actually exists. The case where each claim "unit" is reduced in value is commonly referred to as inflation. The latter case, where some portion of claim units is destroyed is called deflation. Either one can bring things back into balance. Either one will destroy much of the illusory wealth that we've come to believe we have, but neither will necessarily destroy a significant portion real wealth which actually exists.

-Uwe-

Uwe- If there was a 'post of the year' competition, that one would make it in to the tournament.

Right on the money Uwe! This is what the good folks at The Automatic Earth have been saying the last three years. When you have 10 times as many claims on real wealth as there is real wealth there are going to be some losers.

The best analogy I've read is to think of a game of musical chairs with 1 chair and 10 players. As long as the music keeps playing there are no losers but, when it stops you suddenly have 9 losers and only 1 winner.

I believe that we are getting very close to when the music stops. It may have stopped already and people are just trying to dance to the echos.

Answer me this. When 3% growth is considered robust growth, how do the folks who are investing, plus the state pension funds, plus whoever else, plan to make an 8% return long term? How can you ever plan for that kind of return unless you have multiple people who are losing everything or getting zero to slightly negative returns or, you plan on using the hell out of leverage and think it won't ever blow up on you?

I'm just asking...

I find it interesting that people only look at Money - they either want to tax it OR have the Government print it, taking away/destroying a savers stored value.



Why doesn't anyone look at a persons TIME and if they are not productive somehow penalize them. Too many people live off other peoples savings and do absolutely nothing, losing that persons potentially valuable productive time. There are so many things society needs done but there is never going to be enough Government money to do them all, but yet there is so much wasted productive time.

So if someone takes from the Govt. in services you must give back in Money(tax's) or Time. We should put a stop the Suck off. (Of course there is always charitable cases but most are really not in that boat).


To me the left always wants to take away other peoples money for their idea of good, the right wants to consolidate it into a few hands(Big Generalization).

No one should be able to take from others when they should be productive for themselves, it is just wrong.

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Giving it to the people directly will allow it to flow to producers of goods and services that people really want, i.e. the real economy.

Why does everyone take as a given we need to prop up prices. What do I care if my house costs 500,000 or 50,000? The problem with the fall in prices is simply the shock of it. And shocks are temporary. Falling GDP doesn't mean your economy is shrinking, it means prices are. This is a wonderful thing. Allow the market to fix itself and pick up the pieces afterwards by doing your part and taking the cash you saved up and starting a new business by buying out the old one for pennies on the dollar from the moron who leveraged himself into fake "wealth"

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That doesn't work either Boz. "Giving" money to people simply dilutes the existing stock and the price level goes up and destroys the actual value of what you just did.

Exactly why does too much money chasing too few goods cause prices to rise? What is the mechanism involved? A strong demand for his goods encourages a seller of goods to test his customers' willingness to pay more for an item. It is not that the cost of producing the item has gone up, it is solely because he thinks he can get away with collecting a bigger profit. So is it really too much money, too much demand, or too much greed that causes the inflation of prices?

The establishment economists have convinced almost everyone that there is only one possible solution to this problem, namely to reduce the amount of money in society. But really isn't it the greed of the seller that is fueling the inflation. Follow the money and you will see that the extra all goes into his pocket. So why couldn't another possible solution to the problem be to control the amount of profit that is allowed, rather than the amount of money that is allowed? The "invisible hand" that rules the marketplace is invisible for a good reason. If people could clearly see it operating they would demand that it stops ruining their lives.

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Wealth cannot be created without debt

I take exception to that statement. Over the last 11+ years, I've built a successful business and become "rich" without ever having taken on (or creating) any debt.

You may be an exception to that statement. It is possible for individuals to gather wealth while avoiding debt. The rich do it all the time. But on the macroeconomic level the statement holds true.

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and debt cannot be eliminated without destroying wealth

This assumes that money (and other paper assets) actually constitute wealth, a notion I disagree with. Actual wealth consists of tangible things like real estate, mines, office equipment, computers, appliances, tools, minerals, oil, power plants, factories, food, transportation infrastructure, etc, etc. However, money is not wealth; it is merely a claim on wealth.

I agree with your analysis of real wealth, but our current financial and accounting system doesn't. If it did, then natural resources and human resources would surely appear on the asset side of our national balance sheet.

That being said, a claim on wealth is just as valuable as a physical asset for it can be used to purchase physical assets (if you are a buyer) or repossess physical assets (if you are a banker).

If you take a close look at inflation you will see that all price increases only end up in one of two places, either in wages or profits. All price increases in intermediate costs like raw materials, components & supplies, fuel & energy, buildings & equipment, interest, rent, etc. are simply cost transfers from one business to another. If, however, you follow the money back to the business that actually initiated the price increase (ignoring the ones that merely responded to a transferred cost increase), you will find that either internal wages & salaries went up or operating margins & profits increased. There are simply no other possibilities (ignoring taxes).

Just about any chart you look at (or any worker you talk to) will show you that wages have remained stagnant for the last 20 years, at least. So that leaves profit as the only explanation for what really causes inflation. Of course blaming too much money allows lenders to jack interest rates and earn even more profit for themselves and more inflation for the rest of us ...but I guess we're not supposed to figure that out.

Profitslave wrote..

Exactly why does too much money chasing too few goods cause prices to rise? What is the mechanism involved? A strong demand for his goods encourages a seller of goods to test his customers' willingness to pay more for an item.[...] But really isn't it the greed of the seller that is fueling the inflation. Follow the money and you will see that the extra all goes into his pocket.

Nope, it's cost-driven. Look at what has happened over the last year or so. The hot money has gone into commodities and bid those prices up. This drives up costs all over the economy, raising businesses' Cost Of Goods Sold. In my case, it has driven up the price of certain components that go into the product that I sell. It has also increased my employees' cost of living, and since most of them are highly skilled and cannot easily be replaced, if I want to keep them happy, I have to give them commensurate raises. This decreases my margins, rather than increasing them. Thus far, I've decided not to raise prices because the bite these factors have taken from my margins are relatively small, but if this keeps up, eventually, I'll have to raise my prices.

Profitslave wrote..

So why couldn't another possible solution to the problem be to control the amount of profit that is allowed, rather than the amount of money that is allowed?

Because that's a proven recipe for disaster. Were you around in the 1970s when Nixon tried price controls as a means to stifle inflation? Have you looked at what happened in various "Communist" countries which tried to control prices? There's one word to describe the results of trying to control the amount of profit allowed, and that's "Fail".

-Uwe-

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The hot money has gone into commodities and bid those prices up. This drives up costs all over the economy, raising businesses' Cost Of Goods Sold.

Exactly! and what is the essence of "hot money"other than pure profit. Your rising costs are a direct result of commodity speculators seeking profit. And if you decide to raise your prices, you will become another intermediary business that is simply transferring cost increases in response to a profit grab initiated somewhere else in the marketplace.

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Were you around in the 1970s when Nixon tried price controls as a means to stifle inflation? Have you looked at what happened in various "Communist" countries which tried to control prices?

Yes I was, and at the same time he also jacked interest rates to record highs. Could that have anything to do with the failure? Nixon's policies were merely camouflage for one of the biggest handouts to the wealthy in history.

I'm certainly not an expert on communism, but common sense tells me that there was probably a hell of a lot more behind their market failures than merely trying to control prices.

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There's one word to describe the results of trying to control the amount of profit allowed, and that's "Fail"

How many times have the policies and beliefs that we use failed to achieve the desired results? Still we go blindly on, making the same mistakes, without ever seriously considering any possible alternatives.

Anyone who throws around the word greed to equal profit... well, you guys have fun with this.

http://www.monetaryreform.com/MR/firstSt....

Enjoy don's page from his profile too. $250K for everybody, indexed to inflation! Because gosh darn it, they deserve it.

You're an asset on the government balance sheet. I believe that means you're a farm animal.

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Anyone who throws around the word greed to equal profit... well, you guys have fun with this.

I was tempted, but he's in Canada, and therefore pretty harmless.

-Uwe-

I know, MrBill, profit is necessary to build private capital, the foundation of life on earth. It just doesn't matter that the people who actually built all those assets, and then got to pay for them thanks to profits, still don't get to own or use any of them. Of course this seems fair to all of us. It's not greed that fuels profits, it's charity ...after all, we were paid for our labor now weren't we.

Interesting point you raised, however, that currently farm animals are worth more than human beings. Had never seen it that way before.

I agree about "giving money to the people just dilutes" but if you are going to be giving money out ANYWAY, it's the better choice. At least the "looting" via inflation occurs evenly across the boards, and not to just a select few.

We are screwed.

Better be careful though Uwe, ideas can be contagious.

It's patently unfair that only the Federal Reserve can lend money into existence.

Why can't any of us do this? What makes the Federal Reserve any better at managing this than any of us?

It wouldn't be that hard to implement. There would be financial judges who would look at the borrower and determine if the activity that you wish to lend into has a high probability of being paid back. Then the government issues money to the borrower and you get a lien on the asset and its future potential.

Voila, no more bull**** Federal Reserve.

Won't work? Well then why does it work for the Fed? Hmmmmm?

You people have been brainwashed.

Details of my system is left as an exercise for the reader. Where's my ******n Nobel Prize for Voodoo Economics?