All money is created out of debt? -or not?

Discussion in 'Economics' started by Newmoney24, Jan 13, 2013.

  1. They say all money is created out of debt because when a loan is given, it is due back with interest,
    OK, but my question is, Is this always the case?-

    For instance, if the Fed gives $1T to the US government, but gives it in exchange for government bonds/treasuries, then isn't this an EXCHANGE? (not a loan)

    if this is the case, there won't be interest accrued on the $1T, because it is not owed back to the Fed (because the Fed got treasuries in return)

    Looking forward to hearing from you guys, thanks~
  2. If debt came before money, what was the debt paid off with, if not money? I always thought money came from paying soldiers (we can't afford to give you any gold, so here's some money, it's just as good). I wouldn't worry too much about this either way.
  3. well, the way the economists tell it, wealth (not sure that if that is the same as money) is created when you can take something that everybody knew was down there, like that gooey black stuff, and create a need for it.
  4. Debt came before money, and money was/is a convenient way of accounting for it. All kinds of things preceded money for keeping track of debt, then in the circumstance of war the Lydian king figured out that if you took all that gold and silver loot and melted it down into small little circles we now call coins and gave that to the soldiers they had a portable way to carry the loot. He wound up by complete accident creating a nice abstract way of accounting for debt without at all intending to by way of counting the value of each of those coins, and money was invented.
    At least here in the West. I think over in China the story was different.

    Anyway think about it: when you use actual cash to pay for something you are instantly discharging the debt you owe for purchasing the good/service. Use a credit card and you will have to discharge the debt later. Either way the debt is counted in terms of units of currency and interest gets charged in terms of the time it takes to discharge the debt: zip if you pay right away, some non-zero amount if you pay later.
  5. But the treasuries are an IOU, so that'd be debt.

  6. Growth in the money supply is dependent on debt. When you sign your name on the dotted line for that car loan, or home mortgage - the bank can go out and loan those same dollars again. *Poof...... growth in the money supply
  7. vicirek


    Money in modern post industrial countries is mostly created by government debt issuance. Government does not pay debt back. They just print more money to cover liabilities. Hence we had millions then billions now we talking trillions and I do not know what is beyond that.. That would be Keynes economics which assumes certain level of inflation stimulating economic growth.

    Second vey unpopular method today is through economic expansion based on production of goods and services that in effect accumulates in banks as savings. Those savings can be posted as collateral with Fed who can then supply extra liquidity based on real economic growth - very unpopular today.

    Both ways if properly balanced would contribute to accelerated growth.

    However inflationary thinking prevailed and it slows down the economy because banks do not have to invest in real economy. Instead they are paid in freshly minted money just by warehousing and distributing government debt. Money from real economy smell on the other hand and makes local politics dependent on local electorate that is less dependent on government handouts.

    Government debt lets the politicians and government elect/appoint themselves and founders of the US realized that. They wanted to make sure that this vicious circle leading to destruction of the country will not happen. Bureaucrats somehow found ways to hijack this system. In case of the US major debt holders (China, Japan) are electing US politicians and the country declined economically and socially.
  8. in the end, what are we really fighting about?

    A few goldmines

    A few oil wells

    Some water

    And a lot of people who can do work

    If they ever let workers go where they want to go

    Most countries would lose half their GDP

    I don't know that much about it

    But something doesn't seem right

    and I think the little guy is getting screwed
  9. In simple terms:

    Money is debt.
  10. so the more I have?

    the more I am in debt?

    or just the more people owe me

    I'm getting about tired working this hard just so people can owe me money

    oh well, on my death bed I can say, "Look here kid, that's all the money people owe you. Good luck getting them to pay it to you. Never happened in my lifetime, but maybe you can sell that debt to someone else. Some people like having money owed to them."

    They are probably just waiting to pay me back in cheaper dollars. But I know they are good for it.
    #10     Jan 13, 2013