In other words, it "works" for the central banks, who profit handsomely from said Ponzi scheme, such that they have everyone, even governments, by the balls. The only way to theoretically break the cycle would be for everyone simultaneously to stop using central banks' fiat currency. I say "theoretically", because obviously (I'm sure it's obvious to you [peets], if you've figured things out thus far) it will not end without a major upheaval, the likes of which would bring about a dark age. Congratulations to you (peets) for looking at it critically - and how frustrating it will be to see that so few are aware of how badly they're being screwed. Traders (not all, but many) seem to be aware, because they're so intimately connected to and aware of the economics of everything.
You understand it. What you described is how it works. It promotes spending, not saving. Growth over sustainability. Concentrated wealth. Control of the masses. Global enslavement. Central control. Wealth transfer.
Watch this video and let me know if it helps. I encourage you to use this as a foundation. This process could never be fully explained in one hour, but I do feel this is an excellent place for someone like you to start. http://video.google.nl/videoplay?docid=-9050474362583451279
"If the American people allow private banks to control the issuance of their currency, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the people of all their property until their children will wake up homeless on the continent their fathers conquered." - Thomas Jefferson That pretty much sums up where we're headed.
Thanks for the "Money as Dept" video: it was informative (except for those citations and those last few minutes which were too conspiracy-theoretic for my tastes). So according to yous things are how I thought they were. It can work. As long as the rate at which we produce riches keeps up with the rate at which new debt is created, money will keep its value. And the bankers don't have any real power: we can collectively decide to ignore them (stop using dollars) and they won't hold anything valuable anymore. But that's problematic: 1. I'm not convinced it's naturally possible to exponentially increase production forever; 2. As long as we keep the current monetary system, like someone said previously, the bankers have us by the balls; 3. I generally try to reduce my spendings as time progresses, not increase them --as this system requires me to do. It seems I don't want to participate in the economy after all. I don't know how else to survive though. Daaamn this is sad.
what if you print your own currency, will anyone take it from you, maybe only to flush it down the toilet try to think about the differences between government created currencies and all other currencies the same powers and ideas that support a government support the currency they create, which mainly consists of military power for example the pound is backed by the UK government which is then backed by it's military power, the people who support the UK government for whatever reason and etc maybe you can say it's not anticipation of increase in future production that gives reason to print more money, but anticipation of increase in population, and increase in domination over their lives
Wow at least there is a little bit of hope if half a dozen people on this thread understand our economic ponzi scheme. Seems like it is not so bad at the beginning of the ponzi scheme but turns into the nightmare that is happening now by the end. I suggest reading Web of Debt by Ellen Brown I am not to sure about her proposed solutions but would say there are many monetary systems that would work better than the one we have now.
Somebody please correct me where I go astray in my thinking: So this is why it's so urgent to inject capital into the banks: it's not enough to just borrow dollars from people who have them, because that doesn't enlarge the money supply. Only the banks can create money. That is to say, you don't create money by borrowing, but by lending, specifically through the fractional reserve system. It doesn't create money to borrow money from cash lenders, so they have to inject it into the banks, which can multiply it. If they don't do it soon... what happens? Deflation? Shrinking money supply. Production decreases as capital dries up. Jobs are lost. Foreclosures on collateral ensue, but as the underlying value has been decimated, the money that was created by the bank is now a liability on the balance sheet, further reducing the ability to loan... downward spiral. Bankruptcies of the banks happen eventually, erasing the liabilities and resetting the system at the level where the money left is in some kind of equilibrium with the (greatly diminished) value of existing resources? And then it starts again, albeit from a slightly better place every time because some of the things that the capital bought (interstate highway system, the internet, medical advances, more efficient vehicles, etc) have intrinsic value and don't evaporate with the money they were measured by (day spas, inflated residential land, inefficient status vehicles, crappy miracle drinks). Although every time you do have more people who are less self-reliant than the previous generation - I'm thinking about the fact that during the last depression, we were still largely rural, and people had the ability to raise their own food, which offsets the effect of diminished income to some degree. This is no longer true for any meaningful percentage of the population. Of course the Paulson plan could work. Asset values are reinflated by the simple fact that people have money in their pockets and can make their payments again. Productivity and resource consumption resume growing, enabling the creation of "value" to keep up with money supply so debts don't default. So why is it inherently evil, as many here seem to believe? It seems like, as long as the debt continues to be serviced, actual value is created (in the form of things that increase peoples' standards of living). I get the part about it being unsustainable in terms of resource consumption, and that's something I worry about for non-economic reasons, but it seems that in terms of creating wealth, it's a pretty good system, albeit one that requires strict regulation so that things like simple greed and outright dishonesty don't produce asset bubbles which create disequilibrium and its attendant mayhem.