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Debt Is Good: For Funding The Greatest Participation Trophy Ever Created
As the capital markets from Shanghai to New York were melting down in ways hearkening back to the early days of the prior financial crisis - a period of time many would like to forget (or act) as if it never happened - the Nobel Laureate economist Paul Krugman decided it was time once again to weigh in with what will surely be viewed by the so-called “smart crowd” as a brilliant perspective on what ails the world: Not enough debt.
The title of his Op-Ed in the New York Times™ seemed to borrow directly from one of Wall Street’s most celebrated fictional characters Gordon Gekko when he delivered the now immortal line “Greed, for lack of a better word: Is good.” For Mr. Krugman however, there was no need of a “better word” qualifier. He came out blazing with what seems the only bullet in his arsenal as a cure-all for what ever the ailment might be (e.g., debt.) as he argues this view in his latest: Debt Is Good.
As I read, I found myself repeatedly either laughing, or with my head in my hands. What seemed lost on Mr. Krugman was the irony of not only his timing, but also the glaring front-of-mind examples real people, with real issues, currently have that are entirely interchangeable as to replace his call for action; and replace it with the actions they are currently living through. All of which are both suggested as well as endorsed by him and his ilk.
Unlike most I believe I’m uniquely qualified to demonstrate how “tin eared” or “outright delusional” his thesis appears for I: Never graduated high school (although I did receive my GED from The University of S. Maine, so depending on the cocktail discussion, I can show to be “one of their kind” if I implore the Clinton-esque tool of what “is” is skillfully), can hardly spell cat without the use of spellchecker, make more punctuation and grammatical errors where if the Punctuation Police or Grammar Gestapo had their way; I would surely be sentenced to a lifetime of shock therapy.
However, what I have done is graduate from The School of Hard Knocks. An alma mater I’ll contend puts most Ivy League’s to shame in any business competition on the planet. So with that said; you decide whether I make a valid point or argument, for unlike many – I’m not embarrassed by my lack of “debt’s” current manifestation of a “participation trophy” i.e., a college degree.
Now I know, right here, I’ve probably just ticked-off some of you. I understand that, and I’m not trying to make, or be, provocative purely for provocative’s sake. However, I am here to trigger, or possibly kick-start your brain out of lethargy and get one to see things in a light you may not have contemplated. Then; work out how it might apply to your own situations. There was a time that was the reason for “higher education.” Yet today – “group-think” is the main course of the day in my opinion.
Also – let me be clear: I’m not talking about degrees that are required as to practice a profession. i.e., Law, Medicine, Architecture, et al. Although there are issues within this spectrum of education also. I’m speaking directly to those that have the aire of: “It states and reads like I might know something – but so far – there’s never been a job post listing the need for it” type of degrees. i.e., a degree in Allusive Quantitative Hypothesis of Reactionary Illuminations in Wastebasket Theory.
So with all that said I implore any recent graduate (especially those whom attended any that employed Mr. Krugman) to read his latest op-ed with one change: Everywhere he speaks about government debt insert “you” and the “debt” he articulates to be used for all those great infrastructure projects and more replace with “At your university of choice.” Here’s where all this “high brow, chin scratching” really hits the mark – as in your wallet, because; that’s where the real bulls-eye is.
Isn’t it just uncanny how the issue of debt, and debt is good, and the more debt the better, applies directly to the attainment of a college degree today? There are statistics everywhere showing today’s college graduate is more in debt, and will probably stay in debt longer, while a great many will never be able to pay off their tuition bill. For many of today’s recent graduates have nothing more than a degree that is near useless in obtaining a job. Let alone: a job that will pay high enough wages to cover the debt obtained to acquire it. Hense my application of “participation trophy” to many of today’s degrees.
All one needed was to sign their personal sovereignty away, show up to a minimal amount of required classes, turn in C- work (or D+ depending on the grading curve) and presto – you have a degree. What it’ll be good for other than covering the bottom of a birds cage going forward is anyone’s guess. Although one may take pride in the knowledge that, although the cage may not be gilded, the price paid for that paper in its bottom will sure seem like it.
However, don’t take to despair or any need for concern about making a living as to pay off what now may feel like an insurmountable amount as calculated using the highest of minimum wages paid. Take the insinuations made by that most “brilliant” of professors in economics and avoid it all by tacking on even more debt. Sign in, and sign on, to possibly double, if not triple your existing debt load and hit the books (or bong) to enhance your current “trophy” into a bigger and better edition like say a Masters. Or, go for the gusto and decide right here and now if debt is good, then more debt must be spectacular and stay in school and get the ultimate gold stamp with a Ph.D!
Who cares what the cost will be, look at what you’ll have avoided: Work as in – a job. The need to find your own place to live (Mom or Dad’s basement hopefully will still be there if they haven’t had their own money issues) as well as (and here’s the best part) pay on that debt in any meaningful way because, heck – you’re still in school regardless if you’re nearing 30! Ah, but what does this all have to do with “infrastructure” one might be asking. I’m glad you asked.
How about all that “infrastructure” needed at the ________________ (fill in with your school of choice)? All the new wings or buildings that need to be erected to house even more serfs students. Buildings that will more than likely have one or two professors names emblazoned over their doors.
And how about all the money needed to pay for the salaries of people like Mr. Krugman? Can’t let that go unfunded regardless what it may cost you. Don’t forget about his retirement package also – for you’re gonna pay for that as well. And from what I hear, he enjoys the upper crust of society, so keep that in mind as you sign on to do your part as a “debt” participant, After all – Ivory Towers don’t come cheap, let alone what it takes for upkeep.
When I stated earlier about signing away your own sovereignty, I meant just that. For unlike what is perceived as normal debt (e.g., credit card, car, home, etc.) once you sign on to student loan debt; if life hands you lemons; there’s no making lemonade with your student loans. The bitter taste lasts and lasts for the rest of your life until it squeezes the last drop from you. Now that’s debt, no?
Want to look at what more debt does for a nation in real-time? Just look at Greece today. How’s that all working out? This should be the clearest real-time example of what debt, upon debt truly looks like and all its consequences.
Think Greece didn’t take on enough? Looks like they’re following Mr. Krugman’s advice to-a-tee and doing just what he advocates by “taking on even more.” The cost? A total abdication of a nation’s sovereignty, as well as anchoring its population into servitude with no realistic way to ever get out from under it.
One would have thought with all this new debt via Mr. Krugman’s viewpoint Greeks should be dancing in the street. Well, they’re taking to the streets again, but they aren’t dancing. Not only has the new promise of more debt not solved anything, it seems it’s literally tearing the country apart once again before the ink is even dry.
And speaking of debt, hows all that debt doing for China? You know, that land which many such as Mr. Krugman’s ilk lauded over as the country we need to be more like because, over there – they were getting it done. Well yes they were, and debt sure did help. Especially when they took that debt, lever’d it up, and bought stocks to fund infrastructure. Now look at what it’s turning into: an avalanche of margin’d sell orders inciting fear that it could possibly take down their entire market. I can just imagine a Gordon Gekko snickering “Debt is good.”
However it doesn’t end there. We used debt upon debt here (well over $4 TRILLION) to not address any of our issues when it comes to cogent business regulation, tax policies, and more. The academics at the Federal Reserve just created money ex nihilo to purchase our own debt so we too could allow Wall Street to lever up and buy stocks. Now, the mere mention of any policy to raise rates higher than zero has the so-called “smart crowd” whaling and gnashing their teeth reminiscent of an upcoming biblical apocalypse. Why should this bother anyone if debt is good, and more is better? Unless – it isn’t.
This is the beauty of residing within the ivory walls of academia. You don’t have to contend with what most others will never get out from under their entire lives: debt. All while simultaneously advocating the call for ever more debt that will never be paid by they themselves. No, heaven forbid, not that!
It will be paid for by the many that fall prey to their calls of “enlightenment.” Where an impressionable, possibly naive prospective student signs away their life to pay not only for Mr. Krugman’s upkeep, but the upkeep and infrastructure, and endowment, retirement, along with all the other never-ending alumni requests for donations they’ll receive their entire life.
Then, and only then, once that is paid, can they now begin paying for their own debt and taxes. e.g., a car, gas for it, maybe an apartment. All while working a job which hopefully one day might enable them to splurge and actually pay for something – rather than having to scour the internet day and night for a free illegal download.
But not to worry, “debt is good.” Just keep reminding yourself of that every time you look at that “trophy” on your wall. After all, that’s what they teach you in today’s school of “higher education” right? And you paid (and will continue paying) for it – dearly!
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Debt is good...at incarcerating goy sheeple.
Does Krugman make any comment on just who the good ole USA should be more in debt to?
A Keynesian boob known as Paul
Thought debt a solution to all
The logic he used
Was deeply confused
And planted the seed to our fall
A market can never be free
If debt bids the prices we see
Financialization
Has harmed every nation
It's why we're now hooked on QE
Maybe some debt is good? If the debt is to the megabanks and tehy can't pay any goons worthless "dollars" to collect teh real goods you spent that debt on?
Of course to perpetuate this debt based monetary system you need exponentially increasing debt, but to follow that line of thought would mean you believe that debt based money is the only option which it is not. Not to mention that the amount of debt necessary to keep this mess going is not even remotely possible, the economy is debt saturated, not good for a debt based monetary system. It will be interesting to see how they react to these hard economic limits.
If it's NOT the only option, then why has it been around since 1965 and only wants to expand into cyber currencys?
Um, how did this advice turn out in Japan Paul?
Maybe some debt is good?
Debt is fine, when it's between consenting parties. Trading debt as a currency is fine too, under the same circumstances.
Having a government impose value onto a cartel's debt by insisting it is the only legal tender, and forcing its citizens to meet their tax obligations with it, is the problem.
note to self if my son wants to go to Princeton to studyeconomics punch him in the face
He has a Nobel Prize, for God's sake, and we should listen to him just as we listen to our President, and for the same reason.
A do-it-yourselfer named Alice
Used a dynamite stick for a phallus
They found her vagina
In South Carolina
And part of her anus in Dallas
All praise the glory of debt!
http://theologygaming.com/wp-content/uploads/2013/05/Adoration-of-the-Go...
Mr. Krugman: You can have all the debt.
I'll take the gold, Bitcoin, bearings and real estate. Maybe some preps too.
We might take some of that debt too actually. Yes, debt as a whole, as a concept is a bad one... but if you are teh last man on the ledger before teh system goes kaput? Teh legal hat tricks involved in writing your old debts into a new debt-based system would be ginormous. Then compound that difficulty with the fact that half teh debtors are dead or in FEMA camps and you catch we drift....
I really enjoy your posts.
It has to be the future because it seems everybody under the sun is already loaded with debt. These Fed turkeys magically pull it out the future and give it to their buddies now.
I was shredding an old New York Times and happened to read that PK thought we'd be better off economically if we were threatened by aliens. Let's go into debt to them -- it would be like breaking two windows with one stone. {Get it? Windows, not squirrels? Sheesh, tough crowd}
That's the real sept rate hike, the only people who are afraid of aliens, are those who do not believe in them.
I think you have a negative attitude.
As if I care at this point.
Um, moniker joke. But based on that response ... I'm actually right aren't I?
I vote you +1 for moroseness.
EDIT: Downvoter, my -- we are sensitive, aren't we?
It was bad theater and in bad taste, and i didn't down vote ya.
I actually LIKE morose people. Deal with it.
Eye intend too.
Creepy people are another matter however (yikes).
If I was an alien ...
I would park my spaceship on the edge of the solar system with a big telescope. Invite all my alien buddies round and have a bet on how much longer this planet can go on for.
"The rich". Just makes sure the Fed buys enough so that they only get 1%, and that that by 70%. The ponzi can go on forever!
If debt is money and money is good.... and more money is better and money is debt...then more debt is good!
See how day works!
The truth about students I learned when taking an adjunct position at an insignificant college was revealed when I heard them referred to as funding units. It was then after my third or fourth most moronic, faculty meeting that I decided that teaching in a college was clearly a dead end job.
I have taught adjunct off and on since 1994 all at the same college/university. It has gone from ~9000 to 26,000 students in that time span.
50% of the teachers in the chemistry department are adjunct and yet tuition is within 5% of the highest school's cost in the state. The school is making regular facility quite well off from what I can see. BTW - at least in my area, adjuncts get to teach the shit courses.
I would teach college at the Community College level full time.
Debt-based consumption (aka usury) has been destroying civililizations for 3000 years because it is inherently deflationary*.
(*because if a lender is to make a profit then they must eventually extract *more* than they initially put in).
The gradual removal of all the contraints on usury since the fall of the Soviet Union is one of the main factors* in the destruction of the West.
(*alongside mass immigration and off-shoring - both also deflationary)
Yes! Glad someone else sees it.
It's very clear that the destructive agenda in Western Europe was ratcheted up almost immediately after the USSR fell*.
Indeed, multi culturalism, that extremist ideology and mirror image of the Nazi's racial ideas, is only made possible by accumulating debt.
* PS: The USSR was deliberately dismantled. The idea that it collapsed is propaganda. See Gervasi:
https://www.youtube.com/watch?v=b9_aYcpxClA
Debt-based consumption (aka usury) has been destroying civililizations for 3000 years because it is inherently deflationary*.
(*because if a lender is to make a profit then they must eventually extract *more* than they initially put in).
If the lenders never spend any of the interest which they receive, then yes - eventually you run out of money because the lenders have it all. But then how would they pay for all those fast cars and top hats?
The interest is payment for a service. The lenders spend this money to buy goods and services. There is no net transfer of money, but there is a net transfer of goods and services from the borrower to the lender. Unless the borrower defaults, in which case there is a net transfer of goods and services from the lender to the borrower.
See this link which explains it in detail.
It is hard for me to choose "The Most Overrated Person on Planet Earth" between Krugman or Obama... tough call
Krugman - hands down and ALL......DAY.........LONG
Nope, soory. You have to have been actually heard of to rate a world-score.
I guess that up to 99% of the global population will have heard of Obomber, whereas 99% will have never heard of Krugman ... he'd be lucky if 10% in the US had heard of him.
If I did not frequent ZH, then I doubt that I would have heard of him, though I am reasonably cluey.
OK I am in Australia and it is a backwater, despite "Shirty" Abbott's posturing, but I am willing to bet that, globally, he is FAR more (in)famous than Krugman.
Perhaps, but the intellectual and moral damage that fucker has created far outstrips any negative effects Obama has had.
Saint Krugman apparently received a Phd without ever taking a course in basic accounting or learning the definition of the word 'bankrupt'. Using his own premise he should be holding a personal debt of 100 million dollars for his own good and the good of the economy......
Do as he says. not as he does. Kinda like not being able to use turbotax, but then being the boss of the goons with guns ...
I think this goes deeper than courses in accounting or definitions. Krugman and his ilk are trying (remarkably successfully, for a while anyway) to re-define the human experience. They have worked tirelessly to convince people that what defines a man (or woman) is what they consume, NOT what they produce. What you do with your life makes not the slightest difference to them. What you buy, that's who you are. In order to do all that buying, of course, you need to go into debt to these masters of the universe. They are convincing people voluntarily to enslave themselves. I cannot think of another historical example where they have attempted this on this scale. Always before it was limited to much smaller populations. Krugman et al want every man, woman and child on the planet to be in debt to them and like it!
Scary stuff. I still am praying they fail.
Yep, to reach an authoritarian system, first you have to become the authorities.....
Has anyone bailed out banazi yet? Good, jail is just the right place for him.
OUCH, THAT REALLY HURT.
The bearded potato speaks!
I swear that Krugs has to be retarded. No fucking way he is this stupid unless...tarded.
"But don't worry scro, lots of tards go on to lead kick ass lives!" ~ Dr. Lexus
He's just a shill for the banking mafia - all mainstream financial jourmalists are or they wouldn't have a job.
Not necessarily. It's possible he could be a genius, albeit in a fairly sinister way.
If you had rely on credit cards to keep your household running month to month and saw a minimum payment trainwreck on the horizon, then why not gorge on as much (relatively) cheap debt as possible before the day of reckoning? This is effectively what the good professor is advocating.
And the concept of "fraudulent conveyance" doesn't apply to a sovereign, especially one like 'Merica.
OF COURSE DEBT IS GOOD when you're selling the big lie of YOU CAN SPEND YOUR WAY OUT OF DEBT. when the massive implosion hits in October i hope the nailgun party finally kicks in to fullgear!
Don't miss the bus stop, you'll regret it ever after.
Krugmna knows that the neo Bolshevik scam is finished. It's all over but the shouting. He will go down shouting and take others with him.
I just took out a few more credit cards. I'll be maxxing them out over the next few days. I just don't have enough debt. Krugman said it was cool.
Here's what's cool:
Max out your debt just ahead of The Fed pissing itself and giving everyone a one-time credit for up to $50K of personal debt, backed by a special UST issuance. Or if you have a mortgage, $400K of that.
I am not even close to joking. That has been the sub rosa of this shit show all along. Keep the economy rolling on debt under the pretence that everything can be sorted out by magic later, then overturn the debt in one fell swoop so nobody notices. It murders the savers, but that is God's will anyway. Oh and notice please that with the Fed having swallowed all the debt the banks do very well thankyou. Then disband The Fed system, repudiate all the debts, and create a new Bank of America from the ashes (sorry BoA, you lose this time go wash your neck).
This is what we call central planning. They know exactly what they are doing, and they know furthermore that none of this gets paid back.
Some of this "central planning" is just hoping the system implodes after one's term is up (i.e., short-term thinking).
I feel this saying isn't quite right: "The road to Hell is paved with good intentions". Rather, "The road to Hell is paved with optimism". NASA is occasionally a good example.
My 2 scents <wag>.
{FYI, while I'm anti-cat, that's purely a domestic issue. I'd hunt with you, Cougar, anytime.}
{Food is a great unifying principle. Though in the interest of full disclosure I confess I've been known to eat human's from time to time. So long as you are okay with that, I'm down.}
Read my Bio and if you're ok with that -- we're cool. But, no humans on my watch except in self-defense [mostly], M'Kay? It's not like food is hard to come by with my, um ... distance weapons. 'Ruff said.
Doesn't the "Greed is Good" mantra have some non metaphysical intent toward the "absence of liabilities" on the balance sheet?
In other words - Wealth beats Debt, and Debt actually might be a Bad Thing (excepting Governments and Politicians and Fraudsters and Banksters, but I repeat myself) of course.
Hard to tell the winners from the losers lately without a scorecard and uncorruptible accountant (hard to find these daze)...
Very good rant. I give it two thumbs up because he's right. There is no exit when you use more debt to get out of debt. It's mathmaticly impossable.
It's criminal what these colleges are doing to our kids. Enriching themselves by indenting a whole generation to a non- dis chargeable debt, for worthless paper.
Everything can be learned on the web. For free. Or almost free. There should be a network of testing centers. Where ANYONE can, for a modest fee, take a test, and if they pass, get credit. Anyone. Rich or poor. White or black. Young or old.
Put these fucking college scammers out of business . They only give a real shit about the sports any how. Just convert them to a network of sports franchises. Useless for anything else.
Well the world was very much in debt at the end of WW2. But we had the whole world to rebuild AND CHEAP OIL energy.
I guess Krugman deep down believes he is Keynes's true son incarnate, living the same legacy as Keynes's post war BW construct.
Maybe for Krugman's wish to come true we need a war; but that would also need cheap unlimited energy!
How do you pay back the money print and debt if you don't have growth, and to have growth you need energy with EROI of positive ratio. Now that will be more and more a problem with 8 billion people to feed and cheap energy rarifying fast.
Geometric growth of economy as of debt interest are in themselves a huge brake to produce to sell at a price above cost.
Something has to change Mr Krugman, you are talking more and more like a dinosaur.
While chewing on one of Keynes' books I read some of it. It makes more sense than PK (which isn't saying much). Keynes wrote that there are situations where additional stimulous does no good. I'm not defending the guy, but I wonder if modern economic "theory" is giving Keynes a bad name.
I've defended Keynes here in the context of his age against the Libertarian ire and Austrian dogma prevalent at ZH.
So I would say that Friedman and Hayek did more harm to the world economy than Keynes in his day.
But thats an ongoing debate. PK is not Keynes as today we do not live in Keynes's times.
I'm not convinced it's just an era issue. I suspect Keynes' theories are somewhat valid in a limited context -- kind of like fine-tuning a functional economy where stimulous is USEFUL, such as on dilapidated infrastructure. With massive corruption, debt, and stupidity, I think we're in a different zone. Also, trying to fully override free market forces is folly (especially long-term).
Yep ... Keynes explored the concept of the economy but his name has been abused to defend the FIAT money programme, current NeoCon econmic policy and the levels of absurd debt it created.
Think Einstein, he explored physics but then those in power developed the weapons from it.
Again and always, without defining the fundamental terms in a non contradictory manner, proponents for the opposition of the position which they claim to oppose are do a very good job at supporting it.
Debt is good that originates from money. This is investing and a prerequisite of expanding capital, the accretion values.
Debt is bad that originates from the imitation of money. This is theft and a prequisite of extracting capital, the dilution of values.
Debt is fine if you are a smart person or corporation that has a plan for the future as to how you will use that debt to grow your company or personal assets. Debt is horrible if you are only taking on debt to pay for cock you have already sucked
Yes..
Debt can't have enough of it and a side dish of moar war fixes absolutely everything...
But only if you are criminally insane -like Paul Krugman and this other guy who I'm sure taught him everything he espouses!
Get your college degree and move over seas. Debt gone :)
This is a Jekyll and Hyde experiment whereby for the last 40 years we created vast swathes of debt after the 70's economic stall. This is where we grew the equivalent of antimatter.
The likes of Krugmann called this growth it is not...
Well since 2008 we hit the next limit called "the ability to justify the level of debt" and it was breeched. Very hard to expand the level of debt if you cannot earn enough to support the level of debt that is only the interest on the total debt. MAXED OUT.
Japan has breeched this limit though and others if not already there through hiding their true debt liabilities are fast approaching it. UK IS GOOD ON THIS TOOK MONEY FOR PENSIONS AND SPENT IT WHILST ALSO HONORING PUBLIC SECTOR WORKERS FUTURE PAYOUTS AND THE MONEY IS NOT THERE.
Well Krugmann the next limit is when you cannot grow debt and it comes just after the ability to pay it is breeched. We get the concept of matter - anitmatter. As fast as debt is cancelled it starts wiping out new growth. I DO BELIEVE economically we are now stalled.
All that is happening now is all new growth if summed together is being consumed to prop up the current level of debt. Please get rid of those who propose more debt, we need to find a way to create growth that is not going to be consumed by the existing debt.
WHERE KRUGMANN IS AN IDIOT IN THE ABOVE IS TO GENERATE MORE DEBT WE START TO DESTROY MORE GROWTH AND IF NOT GROWTH THE TRUE ECONOMY.
Shrinking values is deflation, deflation is this... and what do we currently have? Idiots the lot of them.
"Debt is good".
Give me your credit card then.
I called Wells Fargo to borrow some money. I told them 0% for 20 years would work for me.
They hung up.
I'll take a $ Million, at - 2.5%. Direct deposit please.
Krugman, you should visit Greece.
Tinzz said" There is no exit when you use more debt to get out of debt. It's mathmaticly impossable."
Correct may I also add? It is mathematically impossible to maintain a debt based monetary system without either growing or destroying (Bankruptcy laws) debt.
Both are design features that work quite well with an ever expanding per/capita physical reality energy and resource base. If the FED can print another planet up in a hurry, all will be well.
Just thought I'd reply here too.
I used to think you were right, but in fact it can be maintained as long as lenders spend the interest which they receive. See here for details.
Why would lenders refuse to ever spend their interest? It would be just like them working for nothing. The money is only useful in that it allows you to buy stuff. Perhaps it might be nice to roll around in banknotes, but I imagine you'd get tired of it eventually. And there's nothing to stop anyone else earning money and keeping hold of it.
Duplicate
TY Tnzz
Just search Krugman's articles for success examples of stimulus - there are none in his entire catalogue or writings. It's just a check kiting plan, that's all. He's running a confidence game:
"Those who promise to relieve us of the burden through their personal or ideological excellence, those who claim to hold the Magic Beans, are simply confidence men. Their emergence is inevitable, and our individual opposition to and rejection of them, as they emerge, must be blunt and sure" - David Mamet
http://www.teapartytribune.com/2015/05/18/keynesian-beauty-contest-revea...
Where does everyone think money comes from?
All money is "just created". It is printed, all money that was ever created was "just printed" into circulation. We once had an artificial peg to gold, which theoretically acted as a restraint on government spending -- except that it actually didn't.
By the time it was de-pegged in 1971 it was revealed that the government had *not* in fact been restrained in any significant way from printing money during the 50s and 60s to finance various wars.
Debt is money, in our system. The difference is, if you just print up free money (and distribute it evenly through something like a Basic Income) -- there are no obligations after the money is spent. Debt fosters a debtor-creditor relationship which is fundamentally a power relationship. The purpose of debt is to enforce power relationships.
If we had just printed free money, no one would be paying interest on it. This might have its own problems, but creating 'debt' is a worse solution with more problems than free money!
Money is created as a matching pair of entries in the bank's balance sheet:
Every dollar of deposits in a bank's balance sheet is what banks owe to the account holder. To put it another way, if the bank were liquidated, all the assets would be sold, and the depositors would be paid with the proceeds before the bank's shareholders got a cent.
When a loan is repaid, the deposit and the loan are simultaneously destroyed.
The time you get a problem with credit money is when the banks don't have enough of their own capital to cover the defaults on their loans. Then the creditors of the bank have to pay (or the government makes someone else pay).
The problem with just printing and distributing money is that there are no assets which the money can be ultimately exchanged for. As soon as people lose confidence in the currency being accepted in exchange for goods and services, it becomes instantly worthless, unlike credit money. It's the same as if the recipients were given loans which they never have to repay.
The final soultion for every communist.
Debt definition...something, typically money, that is owed or due.
Now why would I put myself in a position where I owe more money (owed or due) to some entity. This "new normal" is abnormal...Isn't QE taking on debt? If your goal is really inflation, then it would be much more effective and less moral hazard to put it more directly into the hands of the consumer than stock buy backs.
ucde said "Debt is money, in our system." This is the truth per the Fed Document "Modern Monetary Mechanics" which by the way is not taught in any public schools per my knowledge (it should be).
Questions I've been pondering for some time:
1. "What kind of monetary system may replace a debt based system?
2. What system may work well for exchange in world where the pie is either shrinking or static but not growing?
If anyone has ideas or sources for this I would appreciate pointers. PMs seem like a good transition currency if a workable replacement system is not implemened. I have sketched out a home brewed system, which is no less convoluted than the current one but works on different assumptions.
TY in advance for any info.
Probably those Mefo Bills, Right?
Questions I've been pondering for some time:
1. "What kind of monetary system may replace a debt based system?
2. What system may work well for exchange in world where the pie is either shrinking or static but not growing?
First, you must know money is "a promise to complete a trade". It always has been and always will be. And therefore, it is "obviously" debt based. A promise is a debt ... and that's not bad. Failing to deliver is what is bad.
This is obvious from examining trade: (1) Negotiation; (2) Promise to deliver; (3) Delivery. With simple barter, (2) and (3) happen simultaneously on-the-spot. Money allows (2) and (3) to happen over time and space. So money is obviously a trading promise.
Let's take an example of you as a trader: You buy a house by making a promise to deliver 360 monthly payments. You get your promise certified (i.e. turned into money) and you pay the seller. Your trade with the seller is now complete. Your trade with the marketplace is in the process of delivery.
For the next 360 months you return certificates which are destroyed. Before this trade, and after the 360 months, no certificates (i.e. money) exist. During the deliver process, your certificates (i.e. money) trades as the most valued object of simple barter. It achieves this status by (1) being in free supply (anyone can make a trading promise any time and anywhere); (2) supply and demand for the money is in perfect balance all the time ... it's the nature of a trade; (3) the certificates never lose value (explained next); (4) reflecting on (1) thru (3) the money is universally accepted always and everywhere as the most desired object of simple barter.
Now, take the case where you don't deliver as you promised (i.e. you default). Left unmitigated, these defaults make all other circulating trading promises less valuable. Defaults look like counterfeits. To protect the marketplace, your default is immediately corrected with an equal "interest" collection ... the collected certificates being destroyed. It's an actuarial process.
By the relation governing all Mediums of Exchange (MOE):
INFLATION = DEFAULT - INTEREST = zero.
This proper process requires no capital. It requires no one to save before someone can make a trading promise. It requires no commodity backing. It has an automatic negative feedback system when trading promises get reckless (defaults go up so interest collections go up and new deals are no longer viable).
There are many enormous effects when a proper MOE management process is in place. Among these are:
(1) The "time value of money" is "always" one because the "i" (interest or discount rate) is zero. (1+i)^n == (1+0)^n == (1)^n == 1 for all n. Consider what that means to all the financing and investment contrivances we have.
(2) Markets like real-estate must operate totally differently. Leverage doesn't work when inflation is zero. Governments don't work when inflation is zero either.
(3) Government financing becomes problematic because a rollover is a default. Governments never deliver on their trading promises ... they just roll them over. Governments are thus treated as they should be ... as deadbeat traders.
(4) Banks serve no purpose at all.
Growth in a properly managed MOE process is not necessary and thus is immaterial. Hoarding also has no ill effects. All plans for retirement become much simpler and less risky with guaranteed zero inflation.
Your characterisation of money as a promise to complete a trade is excellent, and your line of reasoning from there is extremely good, particularly in the way that defaults look like counterfeits and need to be corrected. But this is in fact the purpose of banks – they risk their own capital to correct defaults.
Defaults are paid for directly by the bank's owners. In order to compensate them for these losses, they charge interest to all borrowers. It's a form of insurance – the borrowers have to pay premiums to compensate the holders of the money in the event of the borrower's promise to repay being broken.
Banks, as insurers of the value of money, are performing a useful service, and have as much right as car insurers to be paid for this service. Therefore they charge more than the amount required to cover defaults, and spend the difference.
See this explanation.
All official economic activity in the western world, is based on swapping third party IOU's. Nobody ever makes money. Nobody gets ahead. The banks only become greater, and greater creditors over time - until they own title to everything.
Nobody ever makes money. Nobody gets ahead. The banks only become greater, and greater creditors over time - until they own title to everything.
Sounds to me like banks then "get ahead" ... or are banks "nobody"?
Wrap your thinking around this: "Money is a promise to complete a trade". It always has been and always will be. It is created by traders making trading promises and destroyed by traders delivering on those trading promises. In the mean time these certified trading promises (money) circulate as the most desired objects of simple barter trade. They allow simple barter to proceed over time and space.
by nobody, I was referiring to natural born persons, not corporate entities.
by nobody, I was referiring to natural born persons, not corporate entities.
Must a bank be a corporation?
Regardless. I know many many people who have gotten ahead. I know many many who made bad choices and fell behind. I know many who had bad luck and fell behind. I no many who got a large head start and lost it. I know a few who won the lottery and surged ahead.
You can't micromanage to achieve whatever it is you're trying to achieve. You need to find a natural, stable, process.
I guess it depends on one's definition of wealth, or getting ahead. A collection of IOU's is only as good as the counter-party.
Must a bank be a corporation? I would say yes. How would you even define such an entity outside of an existing legal framework?
How would you even define such an entity outside of an existing legal framework?
Sole proprietorship. But as I said, that is irrelevant.
If the IOU's are certificates (i.e. money) created by traders making trading promises in a properly managed MOE process, they "never" lose value. Zero inflation, zero interest load on reliable traders, and universal acceptance are all inherent in the process.
With a properly managed MOE, the entire marketplace is the counter-party.
'If the IOU's are certificates (i.e. money) created by traders making trading promises in a properly managed MOE process, they "never" lose value.'
Unless, of course the underlying asset decays. Trading IOU's is also a fools game. Incentive to work would disappear, while incentive to issue an IOU would rise. This would immediately cause the currency to trade at a huge discount to actual goods, and services.
In addition, what happens to an individual's IOU's when they die - since the issuer is no longer good for the good / service?
I think the key to your MOE strategy is "properly managed" This is a black box concept, whose interpretation would be different in everyone else's eyes.
How would you even define such an entity outside of an existing legal framework?
Sole proprietorship. But as I said, that is irrelevant.
I guess it depends on one's definition of wealth, or getting ahead. A collection of IOU's is only as good as the counter-party.
If the IOU's are certificates (i.e. money) created by traders making trading promises in a properly managed MOE process, they "never" lose value. Zero inflation, zero interest load on reliable traders, and universal acceptance are all inherent in the process.
With a properly managed MOE, the entire marketplace is the counter-party.
Having no counter-party, gold and silver are better.
Having no counter-party, gold and silver are better.
Support your assertion.
I know many who would gladly take gold and silver confederate dollars, and reichmarks for services rendered. I know no one who would take paper confederate dollars, or paper reichmarks at all for the same services.
I know no one who would take paper confederate dollars, or paper reichmarks at all for the same services.
I have no idea what you're talking about.
If that supports your assertion you fail. You refer to two improperly managed MOE processes. They both failed because they were improperly managed.
Your assertion was about identifying the counterparty. Now you resort to falling back on simple barter of actual objects rather than barter of representations of value.
You aren't referring to money at all. There is no counterparty beyond the here and now. There is none of the efficiency money brings to simple barter ... allowing simple barter over time and space using object substitutes that are universally valued.
Even the poorly managed MOE we use, the dollar, works better than gold and silver. Even with the dollars 4% per year inflation value leak (0.327% per month ... up against the government stealing 8+% simple on every transaction), it works better than enormously inefficient (and insufficiently supplied and always out of balance) gold and silver.
Your Bunker Hunt avatar is certainly appropriate.
Corporations owe their net worth to their shareholders, who are either natural born persons, or corporations which owe their net worth to their shareholders. Ultimately it's all owned by natural born persons.
The banks only become greater, and greater creditors over time - until they own title to everything.
You must remember that IOUs are created (and destroyed) by banks in pairs: a loan (borrower owes bank) and a deposit (bank owes deposit holder).
If you look at the balance sheet of a bank, you'll find that they have very large deposits, which is what they owe to others. Even if they obtained title to everything, they would still have to sell enough of it to pay the deposit holders.
Don't take the plausible-sounding word of Money As Debt's Paul Grignon for it that banks eventually own everything – check for yourself. Look at Bank of America's annual financial report, specifically the balance sheet, and find how much is owed to them in loans, and how much they owe to others in deposits.
The problem comes when banks don't have the capital to cover the defaults on loans – it's then that the bail-ins start. This is why FDIC should be enforcing Prompt Corrective Action, instead of allowing banks to go deep into insolvency.
What Krugman says is "inflate or die". However, after many decades of extreme credit expnsion, more (monetary) inflation (debt) will soon also lead to the death of the world economies... We're getting already close. The final plunge may have already started. No way out. It will get real ugly. Abysmally f-ing ugly. Good luck to all.
I'd say take 'im out, put a shovel in his hand and then see if the shadow of a clue appeared on his face when he gets his paycheck and his net is about 40% of his gross and he feels like he's damn near dead from working. I won't say it because he would probably fuck up the shovel.
Krugman is pretty silly, true enough. But no Austrian has articulated how industrial society will chug along as debt is being reduced. Cutting taxes is super but, if it only leads to more consumption, not relevant.
I'm not quite Austrian – I don't think the Austrian Business Cycle Theory provides a general explanation for the business cycle. But I'm sympathetic to the Austrian School, as one of the few groups asserting that there's no such thing as a free lunch.
I'd say that borrowing is fine as long as the borrower ends with more wealth than they had at first. For example, borrowing to obtain the resources to build a factory to make bicycles would be a good use of debt if a fair price for the built factory is greater than the amount borrowed – and preferably where the factory is productive enough that the loan principal can be repaid using the profit from the factory's output.
Borrowing just to increase consumption is terrible: it just eats into savings, and leads to a sudden crisis and precarious existence once the money has run out.
It doesn't make economic sense for central banks to consider government bonds to be the most valuable form of asset – they are unsecured loans to corporations which typically have no intention of repaying the loan principal.
Krugman can't know we need more debt (i.e. more traders making trading promises), without knowing defaults (are traders delivering on their trading promises). And he doesn't know defaults. Nobody does. That's the problem.
Any properly managed Medium of Exchange observes the relation:
INFLATION = DEFAULT - INTEREST = zero.
You can't properly run an MOE process without monitoring DEFAULTs.
Well, I can see only one way to make Krugmans dream come true - more debt improving a society.
All we have to do is stop ALL "entitlement" payments, and then issue the recipients a stinkin' bill for the past payments. They can get a job or starve. That debt will still be on their records, and may eventually discharged thrugh default instead of repayment. But, at least it can be accounted for.