Article : why debt growth must exceed interest payments

[ThePythonicCow]

Re: Article : why debt growth must exceed interest payments

Fractional Reserve Banking as Economic Parasitism

Interesting paper - thanks, Rajiv. The comparison to the ideal gas law is one I've made, and very briefly objected to, in the iTulip post 4, 3, 2, 1 ... Deflation!. I particularly enjoyed reading the first reference in this paper, "Silent Weapons for Quiet Wars", though that one ("Silent Weapons ...") a bit too far fricking out doomer conspiracy flavored to be good discussion material for iTulip.

You should read this paper ("Fractional Reserve ...") Rajiv ;). It nicely explains that "the bigger problem", is not usury, but rather private central banks monetizing sovereign debt. My simple scenario above (of which I still doubt you understood the quite modest significance) demonstrated that usury did not necessitate inflation of the money supply. The point of that scenario is consistent with this paper you recommended, if I understand this paper correctly. This paper does explicitly state, on pages 20 and 21, that neither fiat currency nor private central banks are inevitably or necessarily unsound, though both certainly facilitate unsoundness. The paper does state that "risk-free" growth of the money in a system by charging interest necessarily degrades the value of the existing money (i.e., inflation) correspondingly. But this does not indict interest used to redistribute wealth (such as my simple scenario) or that is balanced by a corresponding risk of loss.

This paper points out, with a critical over-simplification (see below) that we did not need to convert from a gold backed currency to a debt backed currency in order to avoid throttling economic growth due to some shortage of currency. We could have stuck with the gold; it would have become more valuable as our national GDP increased.

The one over-simplification (in my view) is that gold is physically not a convenient currency in smaller units than roughly nuggets or dime sized coins. If we were still on a gold currency, then gold would be worth I presume many thousands of (current year) dollars per ounce, and a one cent transaction would require a spec of gold dust so fine that my aging eyes could not see it without a magnifying glass and my clumsy old fingers could not manipulate it. This paper however remains in the realm of analogs to the ideal gas law, in which the limit on granularity is (so far as equations such as the ideal gas law pv = nRT are concerned) infinitely small and even in the "real" world of physical gases, the granularity is on the order of atoms, of which there are some 6.022 * 10²³ / 197 in a gram of gold, if my calculations are correct (Avagodro's number divided by the molecular weight of gold.)

I would gladly see us return to a pure gold currency standard now that we could use electronic means to transact in minute amounts (such as GoldMoney.com allows us.) Needless to say, I doubt this will happen in my lifetime. To put that more darkly, if this does happen anytime in the next few years, myself and billions of other humans would likely have died prematurely :eek: (meaning only a civilization destroying catastrophe will put us on a solid gold monetary system anytime soon, in my view.)

Back to this paper. As it stands now and as the paper discusses, most of our money is neither gold nor paper, but computer blips. Even this is not inevitably or necessarily unsound. If these computer blips were only created by publicly understood and limited means, insuring their scarcity, and if the computer money blip system had the highest integrity, insuring no possible "counterfeiting" of blips, then they could make a fine currency. Fat chance.

As it stands, the most powerful empire in human history has outsourced its "blip" management and creation to a private institution (the Fed) with no meaningful insight or reporting. This allows theft on a grand scale.

The recent bailouts of major banks (directly and indirectly via failing companies, banks, GSE's and nations) has hit the American two or three times over. The bailouts were funded by monetizing new debt, which debt is owed to the Fed, and which monetizing inflated the currency (degraded its value.) Each dollar of bailout hits the American tax payer's wallet twice, once as inflation losses and once as future tax (or otherwise promised benefit) losses. Ouch!

The paper goes on for many more pages in a delightful indictment of our current U.S. monetary system, motivating the need for reform. Many excellent quotes from various financial masters enliven the critique.

[ThePythonicCow]

Re: Article : why debt growth must exceed interest payments

While your concept is perfectly clear, you are not addressing the problem.

Yes, it is quite true that my simple scenario did not address the major problems. One of the papers that Rajiv referenced, Fractional Reserve Banking as Economic Parasitism, does far better in that regard. See my comments posted a few minutes ago on that paper.

[Rajiv]

Re: Article : why debt growth must exceed interest payments

tpc,

Tom Greco's book (in three parts) that I referred to above is also very useful to understand the conundrums of money, interest and its problems.

At the root of the problems of money is the desire to get something for nothing. This is the problem with interest. Compound interest just compounds the problem ;) .

[Aetius Romulous]

Re: Article : why debt growth must exceed interest payments

Crap PC - I barely understood it myself LOL.

I guess I tried to make the entries as if the entire economy from the simple example ended up on my desk in a shoe box. I do accounting, but it really is a specialists game, and so I had boxed myself into a corner with some entries I could not make, and things that can't seem to be recorded without changing the rules. So I guess that was my point - when you start with a fiat money that is loaned into existence, it presents accounting issues that have been addressed historically by changing the rules to suit. In this way, there has been "sustainability" perhaps regardless of the Econ/Math theory. Accounting is always the ugly side of that stuff.

Looking at the question of debt based money/sustainability from a purely bookkeeping POV turns up it's own questions on the subject.

I know there is a better accountant on here who can put me right on this.

[Nivelles]

Re: Article : why debt growth must exceed interest payments

It reinforces my absolute certainty that you have no clue what my example shows. ...

It is an absolute certainty that you are the one who has no clue at all about your own scenario, of all things. Sigh. It would be nice if you'd pay attention to one who knows better. That being me.

Don't be bull-headed. It's inappropriate for a cow to be bull-headed.

Mooooving along.....

My model has no banks, no bankers, and no checks. The money in the system, those 100 scraps of paper, is not destroyed.

I already know you've got things wrong. As I keep trying to inform you. You've gotten lost in quibbling over terminology, for one thing. None of what you posted there actually has anything to do with what I have written to you.

You did not pay back the loan in your Google doc. For another thing.

Also, you're wrong in taking it that money is currency, treating them as the same thing. If you don't believe that currency is not the same as money, ask somebody from Zimbabwe about it. Heck, a major concern in the U.S. today, in connection with Federal Reserve activities, is that "currency" and "money" are not the same. The Ka-Poom danger, and all that. The distinction between currency, and money, is a vital one to recognize. But I'm sure you do know the difference between currency and money, you just haven't realized that it applies in your scenario, to those $1 scraps of paper.

Let's go through it again. The following is your scenario. You can't have any objection to your own scenario being stated.

At time 0 there is no money, and also there is nothing economic happening to spend money on. That's the initial situation.

tpc and gnk then make some agreements. They agree that tpc will borrow $100 from gnk. That's a loan which tpc must pay back, at $10 per week, until the loan is paid back, and then with an interest charge of $10 added. So, tpc must pay gnk $110, total.

(Observe, it is your own condition that the loan will be repaid at $10 per week. Also, it is your own condition, that tpc must ultimately pay gnk $110, total.)

They also agree that gnk will hire tpc for shack construction, and pay him $1 per week. Also, that gnk will continue to pay tpc $1 in wages per week, to maintain the shack after it's done.

They also agree that when the shack is done, tpc will pay gnk $1 per week in rent to live in the shack.

You can't have any legitimate objection to my statement of those things, because it's your own scenario.

Thus, at the beginning, there is $100 of money (actually currency,) which was lent into existence, and there are four services to be paid for over time: first, the loan principal; second, the loan interest; third, the wages; and fourth, the rent.

Your scenario as you stated it is here, for those who wish to review it--

http://www.itulip.com/forums/showthr...006#post162006

Turning to your Google doc post, it is a fact that you didn't show the loan being repaid.

The loan repayment column, had you included it, would go from -100 at the top, to +10 at the bottom, to show the loan repaid with the $10 interest. That final payment, the interest, would make it +10 for gnk, of course, as the last column entry.

Notice that it's only with the interest payment that gnk's own money balance will go positive. (If that interest payment ever happens.)

You may try to deny it, because of your nose being out of joint, that anybody would presume to argue with a mathematical cow, but it is a plain and obvious fact that there is no loan repayment column in your doc.

When you left that out, it was a crucial error, because of the simple fact that all of the money comes from the loan. When you didn't keep proper track of the loan, you didn't keep proper track of the money in the system.

Please be a forthright enough bovine to admit the plain and simple fact, which anybody can see, including you, that your doc does not include a loan repayment column. There is no column in that doc with the necessary entries. You may as well admit it, because it's obviously true, as plain as the hair on your picturesquely spotted hide.

Your Google doc post is here--

http://www.itulip.com/forums/showthr...212#post162212

Done correctly, there will be a column that goes from -$100 to +$10, with an increment of $10 each time, because that's a necessary part of the scenario that you, yourself, stated. (That's if the last $10, the interest payment, can really be paid, of course. Otherwise, the column entries will end with 0.)

Since gnk must be both "bank" and "banker," so to speak, (because cows hate the sight of the word "bank,") the loan repayment column is correctly also gnk's money balance. Which means, you did gnk's balance wrong. gnk has to start out at -100.

That -100 for gnk is necessary to balance the books.

Against tpc's +100, gnk has to have a -100. You earlier asserted that you balanced the books, but in fact, you failed to do so. It is not enough to say the books are balanced, you really have to do that. Ask Bernie Madoff if you don't believe me.

For the books to really balance, each plus has to be offset with a minus of equal absolute value. So, for tpc's +100, you have to give gnk a -100.

Then, each week when tpc gave gnk the $10, that entire payment had to be counted as $10 against the loan repayment. The reason why, is that you, yourself, said so. You said the loan was repaid at $10 per week.

But you didn't do that.

Since, at the beginning, gnk has a negative balance, where does he get the $1 to give tpc? -- gnk has to borrow it from the loan repayment, of course. gnk is borrowing it. That leaves the actual, net, loan repayment, each week, at only $9, which is contrary to what you, yourself, set as a condition. In the Google spreadsheet, you made the loan repayments only $9, after you, yourself, said they had to be $10, when you stated the conditions of your scenario.

You changed the conditions without realizing you had done so. After saying that the loan had to be repaid at $10 per week, you changed it, right in the middle of things, to repayments of $9 per week.

Had you done the doc correctly, showing the correct loan balance and payments, you would probably have noticed your blunder. Well, you might have.

Here is the actual loan balance, week by week, that would have been in the Google doc you posted, had it been done correctly:

Initially, when the loan is made: -100
Week 1: (-100+10-1) = -91.
Week 2: (-91+10-1) = -82.
Week 3: (-82+10-1) = -73
Etc.

And that is the same as gnk's balance, when it's correctly done.

The +10 in each case is the money tpc gives to gnk, and the -1 in each case is what gnk borrows from the loan payments to give to tpc.

The net result of which is that the loan is not paid down by $10 each week, as you said it had to be, but rather it's paid down by $9 each week.

You also did it so that gnk owes money on his own loan! Which is odd, to say the least. Each of those $1 amounts that gnk borrowed from the loan payments is going to have to be returned, to truly get the loan paid off.

You had gnk borrowing from his own loan.

Here are the correct numbers, week by week, for both tpc and gnk, when it's done right. Also, gnk's numbers are the loan balance.

Time 0, tpc borrows the $100 from gnk--
tpc, +100;
gnk, -100.
Add it up, total is zero, books balanced, check.

Week 1:
tpc, 100-10=90;
gnk, 100+10=-90.
Add it up, total is zero, books balanced, check.

Now, if you want gnk to give tpc $1, gnk is going to have to borrow it. gnk's balance is negative. gnk has no money of his own from which he can pay tpc.

The actual, financial fact is that gnk cannot pay tpc $1, as you said he did, because gnk has no money. His "money" is -$90. Based on that, no payment from gnk to tpc can occur - unless gnk, himself, goes into debt, by borrowing money.

Do you follow?

But okay, we'll let gnk borrow from his own loan payments, so that he can have a +1 to give tpc. However, since that is borrowed money, it has to be paid back, if the loan is going to be paid off. And it now has to be paid back by gnk!

You do know that when money is borrowed, it does have to be paid back, for the loan to be paid off. Of course you do.

In what you did, you obligated the lender to pay on his own loan. Cows are odd beasts.

But alright, again, for Week 1. We'll let gnk borrow $1 from the loan repayment, even though it does obligate him against his own loan, strangely. The following is then the correct entries.

Week 1, again:
tpc, 100-10+1=91;
gnk, -100+10-1=-91.
Add it up, total is zero, books balanced, check.
(What I show there is gnk's correct balance. You got it wrong in your Google spreadsheet.)

What is the loan balance now? It is:

-100+10-1=-91.

It's the same as gnk's balance, of course (since cows hate banks, so we're dealing with gnk personally.) And a $10 payment on the loan was not made. Only a $9 payment, net, on the loan was made. That is because, as mentioned, gnk borrowed $1 to give tpc. gnk had to do that, because without borrowing he had no money.

Week 2:
tpc, 91-10+1=82;
gnk, -91+10-1=-82.
Check.

And the loan balance is now -82, the same as gnk's balance, as it must be. (And the loan is now $2 in arrears, and gnk is responsible for that $2.)

Week 3:
(as above)
And the loan is now $3 in arrears.

Week 4, the loan is $4 in arrears.

The loan payments are falling behind by $1 a week, and gnk is the one obligated to make up that shortfall. tpc has been making $10 payments, but gnk has not yet made any payments on the money he has been borrowing.

Cutting closer to the chase.....

Week 9:
tpc, 28-10+1=19;
gnk, -28+10-1=-19.
Check.

Week 10:
tpc, 19-10+1=10;
gnk, -19+10-1=-10.
Check.

Week 11:
tpc, 10-10+1=1;
gnk, -10+10-1=-1.
Check.

The loan balance, being the same as gnk's balance, is now only $1 away from being paid. So we are not quite done.

But how did it stretch to 11 weeks, just to almost repay the loan principal, less $1, even though 100 is 10 x 10? $10 per week would repay the principal in 10 weeks, of course.

We're seeing the effect of gnk's borrowing. The $1 gnk borrowed, each week, and gave to tpc, means it takes an additional week to repay the principal.

The loan principal was only being paid down by $9 per week, so it takes 11 weeks to get to $99 repaid.

Now then.....

Week 12:
tpc, 1-1+1=1 (and hey, where's the $10 interest payment?)
gnk, -1+1-1=-1. (and hey, gnk is still negative.)
The total is zero, check.
The accounts are correct. However, the loan is not repaid. We know that because the loan balance is the same as gnk's balance.

If we continue with the same thing, gnk forever has no money. He stays negative. The reason is, he is still borrowing $1 from the loan repayment each time. Also, the loan principal is forever unpaid. It is always $1 short.

And gnk never does get the interest payment which tpc owes him. For that to occur, gnk's balance would have to be +10, but it will never get there.

And you were trying to claim that your scenario worked out. In actual fact, it does not.

The main blunder you made was in starting gnk off at zero, when in fact he starts at -100. You did not balance the books. Cows have gone to jail for that.

Just saying that you balanced the books is not good enough, Mr. Madoff. You have to really do that.

Overall, the things you did which led you into error are:

1) You did not balance the books.

2) You stated as a condition that the loan had to be repaid at $10 per week, but then you let it be repaid at $9 per week.

3) You let gnk borrow money without stating as a condition in your scenario that he could, and without even realizing, yourself, that he was.

And well, in general, bossy made a boo boo with his own scenario. Tsk at bossy.

[Nivelles]

Re: Article : why debt growth must exceed interest payments

... On day -1 there is no money and nothing to exchange. All accounts are zero.

The act of creating a loan instantly demands an accounting with an opposing entry. ...

That's correct, of course. However, in tpc's Google doc, his initial entries were 9 and 91, which is the wrong way to begin. 9 + 91 is not zero. He started out with his books unbalanced. That's why he ended up unbalanced, of course, imagining he had $100 left over. He ended up unbalanced at the end because he was unbalanced at the beginning. (Dang, I am sooo tempted to "use the phrase 'mad cow' in a sentence" but I shall refrain.)

... Thus, we are a bank with no capital.

Right, there was no capitalization requirement in tpc's scenario.

Assume the loan is paid in full within a single fiscal period for simplicity's sake. We have entries this way; Credit LOAN 100/ debit CASH 100. This closes off the Balance sheet account for LOAN, debit 100 against credit 100. The LOAN account and the loan both go to zero and "disappears". Our CASH however, returns to zero in the same fashion, debit CASH 100/credit CASH 100. ...

Right. Done correctly, the cash returns to zero, along with the loan. That must happen, simply because the loan created the cash. No loan, no cash.

Out in the real world, it is not all loans. A Federal Reserve Note may ultimately derive from a loan, in a way, but not all money is FRNs. A Treasury check is not a FRN, for example.

... We run a trial balance and find we are worth nothing. Our only two accounts read zero. And yet, we have 100 hunks of paper just the same.

And that is right. Those pieces of paper that are left over, at the end of tpc's scenario, become identical to canceled checks, and have a financial value of zero. Their only remaining value is as receipts for proof of payment, if ever needed. They are not "money" of course, since, at the end, they no longer correspond to any financial activity in the economy. They become historical documents.

In addition we have been paid interest on the loan. ...

In tpc's scenario, correctly presented, there is no payment of the interest, because there is no money to pay it. There is only enough money to repay the principal.

Since the loan principal created all the money, when the loan principal is repaid, there is no more money.

A blunder tpc made, was in allowing gnk, himself, to borrow from the loan repayments, without realizing gnk was doing that. In turn, that obligated gnk to repay what he borrowed, which tpc did not realize, either. It also stretched things out, interminably, when tpc did not realize that gnk was borrowing.

That's how tpc kept things going. He didn't realize there was a continuation of loans, to gnk, to keep the money flowing to tpc. He didn't have tpc fully repay the loan principal.

... we also have the accounting for the wages we are paying for the construction, care, and maintenance of the "shack". ...

The shack construction might be paid out of gnk's borrowing of his own loan repayments, but there will not be any money to pay tpc wages beyond that. And indeed, gnk has to finance the shack construction out of borrowed money, which he will have to pay back. gnk, himself, borrowed the money to build the shack, something which tpc did not realize.

We open the accounting by recording the first weeks (periods) wages, but we will look at the aggregate entries for the cycle. Credit CASH 10/ debit WAGES 10. When we run the trial balance we find that we have a net income of 10 and a corresponding CASH asset of 10. And of course, we have a handful of notes that show up nowhere. ...

Well, after the first week, 91 of the notes are in tpc's pocket, and 9 of them are in gnk's safe.

The 9 in gnk's safe are the repayment of the loan principal, for that week, and the 91 in tpc's pocket are (100-10+1,) with that last "1" being an amount gnk borrowed to give to tpc.

Each week is similar, up to week 12. Things change, at that point, when we lose the $10 payments by tpc. But it can all be tracked.

So knowing where the various notes are, and why, for any given week, is no real problem.

... Remember we are the bank, and we did not borrow that cash into existence, creating another set of entries as we did. We simply printed the cash, created the appropriate accounts, and put the cash in circulation.

Actually, the way tpc did it, the bank does indeed borrow - from itself! It borrows $1 per week to give to tpc, as long as that remains possible.

But maybe the loan is not repaid. ...

The principal can be repaid, in tpc's scenario, but nothing more.

... I defy anybody to break a fiat money system down to basic accounting principles as they have been observed since about 1600 or so. ...

Heck, I can do a quick overview in general terms.

1. A country and its people spend far beyond their means, a big negative balance develops, and the system collapses.

2. Later, a country and its people spend far beyond their means, a big negative balance develops, and the system collapses.

3. Still later, a country and its people spend far beyond their means, a big negative balance develops, and the system collapses.

4. Repeat, ad nauseum.

Skipping the minor details.

... This is fiat money.

Yep. Hey, it's "only money."

[ThePythonicCow]

Re: Article : why debt growth must exceed interest payments

2) You stated as a condition that the loan had to be repaid at $10 per week, but then you let it be repaid at $9 per week.

3) You let gnk borrow money without stating as a condition in your scenario that he could, and without even realizing, yourself, that he was.

No -- tpc repaid the loan at 10 $GNK$/week.

Let's say in the real world, I have a loan from the bank to buy a car, and I pay back that loan, as agreed, at $300/month. Let's say further that the bank then uses some of its money (which might include the money I just paid back) to purchase some goods or services in the community. Does that mean the bank can then say I did not really pay that $300 last month, because they spent some of it?

Absurd.

Also gnk did not "borrow" money that tpc had paid back. That was gnk's money, for him to do with as he pleased.

And yes, my spreadsheet does have the 10 $GNK$ weekly payment shown. No matter how many times you claim it does not, it is there, plain as day.

You continue to restate my scenario in some different way that doesn't work, and then blame me both for your errors and for not stating the scenario in your style.

If you expect anymore replies from me, please show some respect. Thanks.

[ThePythonicCow]

Re: Article : why debt growth must exceed interest payments

Aetius Romulous -- Nivelles is discussing his scenario, not mine. I agree with Nivelles that his scenario doesn't work.

[oddlots]

Re: Article : why debt growth must exceed interest payments

Sorry Aetius, your knee-jerk response to the thread was not sufficiently embarrassing to justify your humility.

CANNONBALL!!!!

In the pool.

Here's another tangent on this.

Marc Faber is fond of reminding us that the 19th century was punctuated by deflationary booms, periods where the benefits of increasing productivity were shared widely through prices that were falling in the face of stagnant or rising wages. He usually wheels this out, as far as I can tell, to try and point up our inflationary biases.

By inflationary bias I mean our willingness to (unwittingly) hand over the fruits of technological progress - read higher productivity and increasing wealth - to finance (and their government enablers) through apparently higher but actually very volatile asset prices (think housing, stocks, bonds.)

So in a way I'd like to revive the question of whether the notion of self-liquidating debt is a worthwhile concept. If it represents, in monetary terms, a productivity gain that can pay off a given loan in a deflationary manner (i.e., not requiring a corresponding inflation in the money supply / debt burden), isn't that exactly the kind of self limiting system we require? Isn't that the appeal of "sound money": the only wealth that appears is real wealth.

Just asking.

Very interesting thread. Thanks all.

[ThePythonicCow]

Re: Article : why debt growth must exceed interest payments

So in a way I'd like to revive the question of whether the notion of self-liquidating debt is a worthwhile concept.

Whether debt is "self-liquidating" or not is secondary in my view.

The key thing is that the money supply remain roughly constant. Money must remain consistently scarce. Thus it holds it value in a stable economy, or even improves its value in an expanding economy.

Debt, short sales, derivatives, swaps, and all such manner of monetary instruments are often just a means to increase the money supply. This benefits the one who got that increase in the short term, but if they expand the apparent supply of money, they weaken the value of that money for everyone in the long term.

Such mechanisms as only lending for productive means likely to be able to generate sufficient income to pay off the debt are just one of many mechanisms to throttle monetary expansion. In a system such as the one in the U.S., the means for expanding the money supply are so potent that a little detail such as only lending for productive purposes would either (1) make little difference, or (2) if interpreted so as to shut down essentially all consumer debt, all credit cards and all residential mortgages, would kill the economy.

The big ticket items we have to deal with are the massive fraud, the massive market manipulation, the massive monetization of government debt, for bank bailouts no less, and the massive dark pools of incomprehensible credit default swaps on leveraged derivatives of tranches of securitized junk.

[xela]

Re: Article : why debt growth must exceed interest payments

I won't read it again, now. This is up to all the "experts" But I have a very strong feeling that the solutions can only materialize and work if the problems are adressed by both major viewpoints and it's binding element (maybe sounds silly? I see it as a money-"leaders"-people pyramid construct, which created an enourmous challange, many and divided, being divided the bigger problem, but obviously money inversely connected, thus creating a immense imbalance, which in turn may spurn animal insticts in just too many, just too much once it snaps), agreed unisono and the explanation made available to all in a a reliable way (the quality of info is an enourmous imbalance for many in the "lower layers" ).
The latter part being more and more critical, as imbalances seem to show up just about everywhere - obviously, we may have (had) too many "wrong leaders" at all levels (number bias)

[Nivelles]

Re: Article : why debt growth must exceed interest payments

No -- tpc repaid the loan at 10 $GNK$/week.

No, you repaid the loan at $9 per week in your spreadsheet. That's how you got the entries that changed by $9 each week. You just didn't realize, at the time, what it meant.

I could be facetious, and say that one is amazed a cow would even attempt accounting, and nobody is surprised that he's not good at it.

But saying you've done something, and actually doing it, are two different things. By the way.

Also gnk did not "borrow" money that tpc had paid back. ...

Yes, he did. You didn't realize that, because you didn't know what you were doing, and you screwed up the bookkeeping.

Properly done, gnk gets a -100 entry at the beginning, to balance tpc's +100 entry. That's how it's correctly done. That is how you do what is called "balancing the books."

"Balancing the books" is mandatory, to prove that things are being done correctly. That is a fact.

You mistakenly thought that when gnk received $1 from tpc, that gnk "had money," in a positive sense, so that he could give money to tpc. But in fact, gnk did not "have money." His balance was negative.

A person who has a negative balance does not "have money." (Actually, as a practical fact, you do know that.)

gnk did not have +$1 to give to tpc when gnk had balances of -$91, -$82, and etc. That is not "having a dollar." That is "having -91 dollars," and "having -82 dollars," and etc.

A person who has a balance of -$82 does not "have a dollar" to give to anybody.

Unless he can borrow one.

This is why people keep a close eye on U.S. Treasury auctions every week. Because the U.S. government has a large negative balance, it has no money.

Unless it can borrow money.

And yes, my spreadsheet does have the 10 $GNK$ weekly payment shown. No matter how many times you claim it does not, it is there, plain as day.

My dear pastoral friend, you did not include a loan repayment column. Everybody who looks at your spreadsheet can see that. Don't be a fibbing bovine.

Saying something, and really doing it, are two different things. If you choose not to believe me on that point, ask Bernie Madoff.

You continue to restate my scenario ...

Not true. I did your scenario exactly as you, yourself, stated it. Except, I did it correctly, after you had screwed up your own scenario.

If you expect anymore replies from me, please show some respect. Thanks.

Speaking of respect, this all began when you disagreed with gnk, and tried to prove your position. However, as it turns out, he was right and you were wrong. To show proper respect to gnk, you need to go back to him, and admit that you were mistaken. You owe that to gnk. (It's gnk's post #5 in this thread, followed by your post #8.)

Thanks in advance for showing proper respect to gnk, and admitting to him that he was right.

[Nivelles]

Re: Article : why debt growth must exceed interest payments

Aetius Romulous -- Nivelles is discussing his scenario, not mine. ...

Not true, of course. I dealt with tpc's scenario, exactly, except that I did it correctly after he had messed up.

Remarks like that to Aetius Romulous are not going to work for you, TPC, because he obviously knows enough about accounting that he can see you didn't balance the books. You are not going to be able to fool him.

[ThePythonicCow]

Re: Article : why debt growth must exceed interest payments

No, you repaid the loan at $9 per week in your spreadsheet. That's how you got the entries that changed by $9 each week. You just didn't realize, at the time, what it meant.

My spreadsheet column "gnk -> tpc wage" shows the 1 $GNK$ wage that gnk paid to tpc each week, and the column "tpc -> gnk repay" shows the 10 $GNK$ loan repayment that tpc made to gnc per week, for a net difference of 9 $GNK$ to tpc's cash on hand (what I called "balance" in the spreadsheet.)

Do you see those columns and amounts, Nivelles? Do you see those columns and amounts, Nivelles?

I am at a bit of loss to guess how you can so persistently not see what I see there. My current hypotheses to explain this strange phenomenon include:

• Some strange software error causing your computer to display a different spreadsheet than mine.
• Your view of what "must", what "should" be there is so strong that you simply have not seen what "is" there.
• You see the same characters there that I see there, but ascribe some different meaning to them than I do.

If you can answer my twice repeated question just above, then I can confirm or eliminate my first hypothesis and proceed to either yet more hypotheses, or to further seek evidence confirming or denying my other two hypotheses above, or (unlikely, I will grant) proceed to work with you to troubleshoot this strange software problem.

[ThePythonicCow]

Re: Article : why debt growth must exceed interest payments

Properly done, gnk gets a -100 entry at the beginning, to balance tpc's +100 entry. That's how it's correctly done. That is how you do what is called "balancing the books."

"Balancing the books" is mandatory, to prove that things are being done correctly. That is a fact.

That's how double entry bookkeeping is done. I believe that the type of bookkeeping I did in my spreadsheet is called single entry bookkeeping.

There may well be a legal requirement to use double entry bookkeeping in some polities, and there may certainly be such a requirement in most accounting school courses and License Tests for Accounting, but I am aware of no requirement making it mandatory for iTulip posts.

Since the purpose of my spreadsheet was to present this accounting in the simplest way most likely understood by the widest audience, using single entry bookkeeping seemed at the time, and still seems, like a reasonable choice.

Perhaps our failure to communicate tells us that accountants cannot do single entry bookkeeping any better than cows can do double entry bookkeeping?

Are you an accountant per chance?