Bernanke's Next Parlor Trick

[thunderdownunder]

Re: Bernanke's Next Parlor Trick

3.25 Trillion dollars ????
Needed for what???
Ricket is correct that the government which is YOU, will need to pay on that debt alone, each year, at 4% p.a
is
$130 Billion
divided by 150 million working citizens
is only $866. 66c a year
$16.66 dollar a week
$2.38 per day

However $14 Trillion @ 4% is $560,000,000,000 ($560 Billion) in interest ONLY
Divided by 150 Million working US Stiffs
$3732.33c per year
$71.77c per week
$10.26c per day Peanuts really????
BUT thats interest only FOREVER on the Debt of $14 Trillion. Principal remains to be paid.
$14 Trillion Principal & interest over 25 years (300 monthly payments @4% p.a)
Is
Total interest = $ 8,169,147,300,000
Total amount needed to repay what you have borrowed Principal and interest is
$22,169,100,000,000 ($22.1691 Trillion) over 25 years
NOW It gets VERY AFFORABLE for the US working Stiff
Thats only for each one of you 150 million working stiffs a Principal and Interest bill of
$147,794 total repaid over 25 years
or
$5,911.76 per year
to be found now, out of your taxes, your wallet and your grand kids ass

PEANUTS ANYONE ????
God I hope Interest rates don't double or triple and you don't borrow any more because it really does bankrupt everyone of you right at this moment.
WHY??
I an't got it - have you ???? and I hope I have the maths wrong (And I did stuff it Metal man -see edit)
but at 8%

Interest jumps to
$18,416,281,000,000 - near enough an extra 10 trillion
P& I = $32,416,281,000,000
or
$216,108.54 to be found on top of your current taxes, per (read poor) working stiff, over the next 25 years

VAT or GST you get be cause governments only spend and never save

[metalman]

Re: Bernanke's Next Parlor Trick

$58,978.42c per year for 25 years
to be found now on your current debt, out of your taxes, your wallet and your grand kids ass

but... but... but... haven't you heard? we never have to pay it back! we'll 'grow' our way out of it.

[thunderdownunder]

Re: Bernanke's Next Parlor Trick

YEP YOUR RIGHT 4% is well below average interest rate, looks to be 6-7% long term. Do you want to sleep tonight or will I redo the maths at 8% and give everybody an enema.
P & I goes ballistic when interest rates rise (Exponential !!- think of a plane crash path in reverse)

WILL SOMEONE CUT OFF(or at least cap it) BERNWANKIES CREDIT CARD PLEASE !!

[Mango]

Re: Bernanke's Next Parlor Trick

I rarely see charts (maybe never) in any Counterpunch article.

I tried to write Whitney at the the email listed a couple days ago after another piece he did on deflation. I asked him if he reads iTulip.

I got a message back telling me that my message wasn't delivered--but it's still trying.

[Slimprofits]

Re: Bernanke's Next Parlor Trick

This is a myth, and is not correct. Interest received by banks can be spent back into the economy. New money does not have to be created to pay off interest-bearing loans.

Example: A bank lends me $1000 at 10% interest. Interest gets paid before principle, so I pay the bank $100 in interest, leaving me $900. Then I do some work for the bank, and they pay me $100. Now I pay the $1000 in principle off. No new money had to be created. The loan was paid in full, including interest.

Yes, but that rarely happens. Seriously, your example is the one that sounds like a myth.

Where on this planet are banks just hiring people left and right to do random odd jobs?

[ThePythonicCow]

Re: Bernanke's Next Parlor Trick

Ricket:
This has to be the 468th time I've read you say this. It's starting to get clearer. I've reread what Ash and Sharkey have written as well. I feel I'm almost there. Thanks.

Yeah - Ricket is consistent :rolleyes:.

I look at it this way. An ideal money base would grow and shrink with the quantity of goods and services available. When this happens, price changes occur because of things like inventions (e.g. lower computer prices), scarcities (e.g. crop failures), change in labor capacity (e.g. immigration or demographic changes) and such. Prices don't change just because money becomes more abundant or more scarce. Ideally, a penny saved now is worth a penny earned at some future time.

Gold is one common money base. When the Spanish stole great quantities of Aztec gold, they experienced inflation. When the 49'ers found gold in dem dar California hills, there was inflation in California. When the economy grew strongly in the USA midwest in the late 1800's, there were spots of deflation due in part to limited currency base.

Debt is another common money base. That's what we have now in most economies in the world. It also fails at times to provide a monetary base that grows and shrinks ideally. It tends to grow steadily, depending on prevailing interest rates. This is what Ricket reminds us of. In a steadily growing economy, this can be a half-way decent fit of money base to the quantity of goods and services available.

Debt has (at least) two weaknesses as a money base.

1. Debt is too easily inflated by the more powerful, to their short term advantage, but at a long term cost to others.
2. Debt doesn't easily shrink in times of economic downturn. It shrinks alright, but via the disruptive mechanisms of loan default and economic depressions.

These two weaknesses result in a debt based currency tending, over time, to inflate. A dollar saved now is worth a few cents earned sometime in the future.

[ricket]

Re: Bernanke's Next Parlor Trick

This is a myth, and is not correct. Interest received by banks can be spent back into the economy. New money does not have to be created to pay off interest-bearing loans.

Example: A bank lends me $1000 at 10% interest. Interest gets paid before principle, so I pay the bank $100 in interest, leaving me $900. Then I do some work for the bank, and they pay me $100. Now I pay the $1000 in principle off. No new money had to be created. The loan was paid in full, including interest.

There are a few flaws in this line of reasoning. First, you are assuming that this particular scenario applies to every transaction, but it does not. You are also assuming that every individual who takes out a loan works for an entity (such as a bank) that creates the money and receives the interest payments that can then be "recycled" so to speak, for labor or services performed by the borrower. This is obviously flawed, as only banks can create money (at least denominated in Federal Reserve Notes) that can then be added to anyone's bank account or balance sheet and private employers do not receive interest payments from their employees.

Your scenario would in fact work out perfectly if your employer could create that $100 to pay you for the work, and not have it come from another source (such as a loan from a bank, or payments from customers --who themselves probably borrowed it from a bank, or the customer earned it from working, but *the customer's* employer had to *also* borrow it from a bank for it to exist as well). But it does not. Every penny that 95% of private employers have on their balance sheets had to be issued by a bank at some point in time, most likely in the form of some kind of loan or line of credit (which more than likely the banks charged the company interest for creating that money and extending it to them). The characterizations of the banks and banksters having many arms, heads, etc is very accurate indeed!



In summary, this is the problem with the regular public not being able to create their own money and only having that right delegated to the banks in the Federal Reserve System. Since every transaction is "denominated" in Federal Reserve Notes, in order to settle the "debt", your goods, labor, services etc all have to be converted in some fashion into Federal Reserve Notes and the only way banks will do that is by loaning you money to do so, but again, theyre going to charge you interest for doing the "conversion".

PS: I apologize if this isnt too clear...I am only beginning to understand this entire scam myself. But everywhere I turn, I can't seem to find any other explanation for what I encounter every time I interact with banks. This explanation makes things make such perfect sense for me in my head, it's absolutely startling.

[ricket]

Re: Bernanke's Next Parlor Trick

Ricket:
This has to be the 468th time I've read you say this. It's starting to get clearer. I've reread what Ash and Sharkey have written as well. I feel I'm almost there. Thanks.

I still try to read, re-read, etc all this stuff about it. I need to take a few moments and read in-depth their arguments, but I feel like I almost don't have to because my everday experience with loans has always been that the interest is never loaned to me. I always have to get it from somewhere else (like working). But if everyone else is doing this, then where is all that "interest" actually coming from?

Yeah - Ricket is consistent :rolleyes:.

Sometimes it helps to read something over and over again, until finally theres that "OH SH*T!" moment of realization when the truth dawns on you. If I can get anyone else to understand what it is that I'm saying, then maybe that will change their lives, cause it certainly has changed mine.

I look at it this way. An ideal money base would grow and shrink with the quantity of goods and services available. When this happens, price changes occur because of things like inventions (e.g. lower computer prices), scarcities (e.g. crop failures), change in labor capacity (e.g. immigration or demographic changes) and such. Prices don't change just because money becomes more abundant or more scarce. Ideally, a penny saved now is worth a penny earned at some future time.

Gold is one common money base. When the Spanish stole great quantities of Aztec gold, they experienced inflation. When the 49'ers found gold in dem dar California hills, there was inflation in California. When the economy grew strongly in the USA midwest in the late 1800's, there were spots of deflation due in part to limited currency base.

Debt is another common money base. That's what we have now in most economies in the world. It also fails at times to provide a monetary base that grows and shrinks ideally. It tends to grow steadily, depending on prevailing interest rates. This is what Ricket reminds us of. In a steadily growing economy, this can be a half-way decent fit of money base to the quantity of goods and services available.

Debt has (at least) two weaknesses as a money base.

1. Debt is too easily inflated by the more powerful, to their short term advantage, but at a long term cost to others.
2. Debt doesn't easily shrink in times of economic downturn. It shrinks alright, but via the disruptive mechanisms of loan default and economic depressions.

These two weaknesses result in a debt based currency tending, over time, to inflate. A dollar saved now is worth a few cents earned sometime in the future.

These are all very good points, but they are irrelevant in our current monetary system. There is a mental flaw, and I'm getting closer to being able to identify exactly what it is and why these statements are irrelevant, but it goes something like this (this was written in my previous post in this same thread):

In summary, this is the problem with the regular public not being able to create their own money and only having that right delegated to the banks in the Federal Reserve System. Since every transaction is "denominated" in Federal Reserve Notes, in order to settle the "debt", your goods, labor, services etc all have to be converted in some fashion into Federal Reserve Notes and the only way banks will do that is by loaning you money to do so, but again, theyre going to charge you interest for doing the "conversion".

[Sapiens]

Re: Bernanke's Next Parlor Trick

In summary, this is the problem with the regular public not being able to create their own money and only having that right delegated to the banks in the Federal Reserve System. Since every transaction is "denominated" in Federal Reserve Notes, in order to settle the "debt", your goods, labor, services etc all have to be converted in some fashion into Federal Reserve Notes and the only way banks will do that is by loaning you money to do so, but again, theyre going to charge you interest for doing the "conversion".

ricket,

If I may suggest, take an accounting class. It will help you comprehend the system.

Regarding your above statement, transactions are not "denominated" in Federal Reserve notes, they are denominated in "Dollars".

It will greatly help you, if you are abled to comprehend how a "Dollar" went from being defined as a definite amount of precious metal to just a conceptual unit.

[ThePythonicCow]

Re: Bernanke's Next Parlor Trick

These are all very good points, but they are irrelevant in our current monetary system.

No ... I don't think my points are irrelevant. Rather I suspect that they are relevant and we might even roughly agree on them. However there seems to be a separate and additional point you're making, something about it not serving us well to grant banks a monopoly on making money.

[WildspitzE]

Re: Bernanke's Next Parlor Trick

I still try to read, re-read, etc all this stuff about it. I need to take a few moments and read in-depth their arguments, but I feel like I almost don't have to because my everday experience with loans has always been that the interest is never loaned to me. I always have to get it from somewhere else (like working). But if everyone else is doing this, then where is all that "interest" actually coming from?

Another source is the money that remains after a default in debt or when debt is written off (i.e. the "defaulted" principal amount).

[ThePythonicCow]

Re: Bernanke's Next Parlor Trick

If I may suggest, take an accounting class. It will help you comprehend the system.

I doubt an accounting class would reliably enlighten on such matters, oh wise one. :rolleyes:

Regarding your above statement, transactions are not "denominated" in Federal Reserve notes, they are denominated in "Dollars".

Often times, when I notice what I consider to be an easily corrected error in someone else's statement, I find it more productive to correct the error in my mind and react as if the other person had spoken more accurately. Simply pointing out the alleged error to the other person doesn't usually lead to further useful discussion. One is better rewarded by looking for and then reacting to whatever more valuable insight or thought might lie behind its imperfect expression.

[gorkypark]

Re: Bernanke's Next Parlor Trick

This is a myth, and is not correct. Interest received by banks can be spent back into the economy. New money does not have to be created to pay off interest-bearing loans.

Example: A bank lends me $1000 at 10% interest. Interest gets paid before principle, so I pay the bank $100 in interest, leaving me $900. Then I do some work for the bank, and they pay me $100. Now I pay the $1000 in principle off. No new money had to be created. The loan was paid in full, including interest.

If this were true, why is Ben acting as if a deflationary environment were kryptonite for the debt-as-money system? In the current system, inflation (ie. continued debt creation) is essential for the game to continue....ever more money/credit HAS to be borrowed into existence (that for a time keeps up with the productive economy) to retire the old debts plus interest. Unfortunately, the 'rentier' economy has increasingly eaten away at the productive economy, leading to near collapse of the system...

[ThePythonicCow]

Re: Bernanke's Next Parlor Trick

If this were true, why is Ben acting as if a deflationary environment were kryptonite for the debt-as-money system?

The bank -did- gain wealth in this transaction. It gained $100 worth of Sharky's services. This is the "normal" mildly inflating economy that banks like. Money expands with the goods and services, with banks profiting along the way.

Banks profit from the interest on reliably serviced debt. As ricket reminds us, banks require a continuing expansion in the money supply if the money is based on such debt. The interest is that expansion.

Banks lose from debt defaults, which are the mechanism by which debt based money economies reduce the money supply (deflate).

[Mango]

Re: Bernanke's Next Parlor Trick

Often times, when I notice what I consider to be an easily corrected error in someone else's statement, I find it more productive to correct the error in my mind and react as if the other person had spoken more accurately. Simply pointing out the alleged error to the other person doesn't usually lead to further useful discussion. One is better rewarded by looking for and then reacting to whatever more valuable insight or thought might lie behind its imperfect expression.

Sounds like uncommonly wise common sense to me.

Now, for Ricket's argument--hasn't an economic school of thought arisen long ago to deal with this rather simple way to consider the creation of money/debt? I'm no economist, but it seems that this should be a well known, even if still-debated, argument in the history of economic theory, and that it simply can't be in discovery for the first time in history right here on iTulip. Doesn't it already have a name?

Is Steven Keen (assuming that I'm understanding HIM correctly) the first one to hit on this issue? Isn't this M Hudson's argument about compound interest overwhelming all societies? Aren't there mathematics and doctoral theses and carefully laid out analytical arguments instead of just the too-short ad hoc impressions and arguments of iTulipers?