You never stated if any other money was lent out. The problem with what you are saying and with our economy is that there is $100 dollars in circulation and $105 owed. If only a $100 exists you could not pay back $105. Banks do not spend money they lend it out. In our system that 5 dollars will never be in circulation unless their is an interest attached. Which would reduce it's value.
slider your 2 remaining brain cells have nothing in common you're too fucking stupid to understand why a cow pissing on your head is a weather report.
You really don't understand a thing Slider. It is both a bane and beauty of the system that the central bank can create that $5 out of nowhere. Think of money as an ingredient in a recipe for a product. Imagine the inventor/company that wants to manufacture a computer but for want of money cannot set up shop. Here comes along Mr. Banker and gives him money which has theoretical value but is nothing really but paper. The inventor/company takes this theoretical value and then creates computers which have real value. So out of little more than paper the inventor or company creates computers! Talk about turning lead into gold! Get this fact straight Slider: wealth is not derived from money or currency. Wealth comes from goods and services. You can dump all the paper money in the world on your deserted island but if you have no goods and services to buy there with it, you are effectively poor. Look up the idea of mercantilism. The Spanish Empire and Portugal learned to their chagrin how worthless all their accumulated gold was in relation to the technological advances made by other countries.
Watching this thread was a total waste of time ... but I couldn't take my eyes away watching this trainwreck of damaged intelligence. Conclusions: Slider needs to get off the pot, and take principles of economics classes, then followup with some monetary economics. My own (some regurgitated) ideas to contribute: - Expansionary monetary policy is responsible for boom/bust cycles and long term inflationary trends. - With a deflationary trend, business has no incentive to invest/operate as its future earnings will be less than its capex to make/sell product. - Quality of life isn't so bad. Yes, people often work 2 jobs now, but those jobs are hell of a lot easier than 50 years ago. Additionally, nowadays they need more money because they -consume- and -borrow- more. I know plenty of people who drink $4 starbucks products daily, use $100/month cellphone plans, etc. None of these things are absolutely necessary. In fact, if you revert to a 50 yr ago lifestyle, you'll find that you can easily live off 1 job. - Banks are good at blowing out on leverage and misrating debt historically. Just look at savings and loan crises, South american debt crisis, subprime, etc. Nothing new. Bankers look boring, but they are out of control gamblers. (paraphrasing Taleb) - Anyone who is 'anti-interest' has no experience in finance obviously. Why would anyone want to lend you money if you won't pay to borrow it? Think a little harder, and you'll quickly come to the conclusion that economic activity, growth, savings, investment, etc would all stop if interest payments ceased. For the practical folk, that means no investment in resource we consume (water, food, energy). That means no innovation, death of technological growth, and everything else. - Boom/busts are the price we pay for the long term productivity growth and paradigm shifts we enjoy that result from monetary policy and interest. OK. I can't devote any more time to this... something about this trainwreck was attractive... like doubling down on a losing trade.
Answer this question for me. When everything starts collapsing like it is now and lets say hypothetically it becomes a depression. Why do people stop working and go hungry. People could start some sort of barter system in a community. Our production capacity does not disappear because there is no paper money. Our production capacity has the same potential with or without paper money. Why do people decide to go hungry and suffer because the paper money ran out?
I think you should think more about his question. It is more subtle that your current thinking. BTW: all banks in Japan have been lending at practically zero interest. We did not see your lawyer showing up there to take that loan? It is at zero intrest, and yet you did not show up.
People are MUCH better off today then they were 30 years ago. Back then many families used to live together, had one car per family or so, our standard of living and that of most countries is much higher today.
When I wrote that I was thinking of my Grandfather so it would be more like the 50's. He was a plumber with a wife and 2 kids. He had the same equivalent of all the toys we have now for that era. Now the wife would also need to work to have that life. That is pretty subjective though. I have tried to find graphs on average wage vs average cost but could not find any. If there were a graph that showed that ratio over the last 50 years it would be interesting to see. That would give a fairly objective view of the average quality of life then and now.
Cache: I think you are underestimating the arguments and thinking/questions of the other fellow? Do you know what the real opportunity cost of money? It is NEGATIVE! If you take your interest and your principal, you will realize that you lost money. If it were zero interest, did it occur to you that money may actually gain value (like gold)? Also you argued that money cannot have zero cost and showed all reasons for it. Then how could you explain this: 1. Zero interest in Japan and you did show up to take it. 2. NEGATIVE interest in Swiss. in the 80s and you people were still sending money. Why? Because you did NOT think of the possibility of what you call cost of money as something that can be NEGATIVE. Your mind conceive it only as positive. There lies one of your mistakes. You should study economics (not the one they taught you or you think you learned).
Nothing is collapsing. This is a wealth transfer. If you live in Michigan, your life sucks. If you live in San Diego and didn't overlever, you are still having a great time. If you live in San Diego and went 120% financed into a loan in 2005, your life sucks. No surprise there. If you are from one of the developing Asian countries, there is a high probability that your standard of living is much better than ever. Just because FNM is a $12 stock doesn't mean the sky is falling for everybody. And yes, incentive to produce (thus capacity) *does* disappear when money supply tightens and cash holds more value than assets/things. [deflation] People go hungry when they have no work to do. And they have no work to do because business has no incentive to invest, as asset values dwindle and make the future value of assets negative. That comes from deflationary monetary policy. (appreciating currency / devaluing things)