Is this understanding of economics valid:

An Economy initiated by loans at interest (like ours & the world's), by design, must fail.

For example:

Mr. Fedrick Reservenbord decides to create a small economy by creating a currency and loaning Mr. Gov N. Banks $1, which he is to repay after one year, at 10% interest ($1.10).

Mr. Banks then loans out 12 cents to one guy, 5 cents to another, 25 cents to another, etc. in 9 month loans at 11% interest (he's gotta make a buck right?).
So Mr. Banks collects on his loans, some guys default, some don't... whatever.

Even if Mr. Banks collects every cent he loaned out -- every cent in existence!
*** HE WILL STILL ONLY HAVE $1. ***
The money to pay the 10% Interest to Mr. Fedrick Reservenbord simply doesn't exist. Sooner or later, Mr. Banks will default.

The System, by design, fails all involved except he who initiates the currency i.e. Fedrick Reservenbord.
This is why the economy has no option but to ultimately collapse.

Why doesn't anybody mention this? Am I wrong?

Yes, additional loans can extend the life of the economy to a point, but ultimately, the fate remains unchanged.

Yes, additional loans can extend the life of the economy to a point, but ultimately, the fate remains unchanged.

[edit on 3/2/2010 by verbal kint]

reply to post by verbal kint


Yes and No.

It is overly simplified. But it is true in the sense that a game with only $1 can never pay back $1.10 all at once. It can over time pay ten cents a month for eleven months as long as the money keeps coming back in the front door.

I'm afraid you're spot on VK.

A good place to further your understanding of the monetary system would be Peter Joseph's take and explanation starting here:

Excellent Video Jumping Off Point
No pun intended, :p

Excellent place to start at any rate.

But it sounds as though you've already got at least 90% understanding.

It would seem that if even 3 percent of the population was as alienated as you and I, there would certainly be repercussion on wall street and in D.C., for it is pivotal that we stay oblivious to further perpetuate our banking system. That, in itself, and highly ironically, should ring every alarm bell there is to ring.

EDIT: Just a quick 'btw'...it's not good practice to use all caps. It's hard to read, and is made redundant by the exclamation point (use as many of these as you see fit though ).

Peace

[edit on 2-3-2010 by lagnar]

You are partially correct.

You must remember that in a banking industry whose underpinnings rely on "fractional reserve lending' the truth is that Mr. Banker upon 'issuing' the loans does not actually 'give' then debtor ANY money. He 'creates' it.

Hence if I have $1 dollar in deposit, I can create another $10 in loans (since I don't have to have the money to begin with - I can legally loan more than I have). Where does the other $9 come from, you may ask? The Central Bank, which creates the money and 'loans' it to the state...at interest (which we pay off in taxes) it then gets deposited into Mr. Bankers account who can now (since his deposits are larger) create MORE loans; which makes the cycle of Mr. Banker's growth infinite... even though national resources are finite.

They deal in debt, not money. We have no money... only Federal Reserve Notes depicting the debt we each 'own.'

Maxmars nailed it on the head and beat me to the punch! There is no such thing as money, only debt and the representation of said debt via Federal Reserve Notes that we have been programmed to believe are "Money" and have "Value". In Fractional Reserve Banking, the system currently in place, it is simple to print more "Money" as they simply represent the creation of more debt. As with any other ponzi scheme, eventually it collapses under its own weight as the service on the debt exceeds the debtors ability to produce enough capital to cover it. To be clear, we're past that point!

reply to post by Maxmars


Fractional reserve lending is just a manufactured scam (as you stated) created to perform the function of additional loans from the Fed Res - without actually taking additional loans. I suspect that compounding debt required by the system spun out of control too rapidly, thus fractional reserve lending was created to compensate and extend the life of this clever invasion of the general population's anuses.


Yes, there is no "money". Or maybe more accurately, "money" is nothing - OR even better, "money" is less than nothing, it is debt. Nonetheless, the term "money", while often misunderstood, does function to further communication (e.g. as used in the OP.)


(Thank you for the CAPS reminder - this was originally written for a different format and I overlooked the matter).

[edit on 3/2/2010 by verbal kint]