[MonteQuest]

$this->bbcode_second_pass_quote('', 'W')hether the US can repay the 7.3 trillion USD is a separate matter and a serious one. That has to be paid out of future production and unless Americans forgo consumption (i.e. lower their standard of living) out of future economic growth.

[kjel]

All your comments about US indebtedness are fine. I don't disagree with them. But you when say it's necessary to borrow to repay that debt it can mean two things. One, is that you simply don't have the income to repay that debt otherwise so you deferr the problem and dig your self another hole. Two, you seem to be saying that borrowing to pay interest is an essential and inescapable feature of the monetary system. That is not correct.

Your banker is absolutely correct, debt is issued to create money. What your not seeing is that this is in many ways just a convenient arrangement. As an alternative, governments could and have just printed money with nothing to back it. Instead, governments have evolbed the mechanism of the central back to put control of the money supply and thus inflation at arms length, to reduce the temptation to just print money. Instead, they have given this power to the central bank, the FED.

The other thing your not seeing is that a finite amount of money (tckens) can be used to pay for a theoretically infinite amount of goods. The magic is in the circulation of the tokens: i give a token to you in exchange for goods and in turn you give it right back to me for more goods. Its in this process that sufficient funds are found to pay interest.

$this->bbcode_second_pass_quote('', 'D')ecreasing cheap energy supply=no GDP growth=no ability to finance debt=dollar devalued=world deflation=interest rates up=inflation and housing bubble crisis=movement out of securities=collapse in the bond market. GDP goes up=increases trade deficit=exchange crisis.

[MonteQuest]

$this->bbcode_second_pass_quote('', 'O')ne, is that you simply don't have the income to repay that debt otherwise so you deferr the problem and dig your self another hole. Two, you seem to be saying that borrowing to pay interest is an essential and inescapable feature of the monetary system. That is not correct.

[MonteQuest]

$this->bbcode_second_pass_quote('', 'T')wo, you seem to be saying that borrowing to pay interest is an essential and inescapable feature of the monetary system. That is not correct.

[kjel]

Here's someone else's take on this debate Myth #11: The Antidote to the Debt Virus

$this->bbcode_second_pass_quote('', 'T')he other major flaw in the Debt Virus hypothesis is that it ignores the role of the central bank in the money-creating process. The Federal Reserve creates a measure of debt-free money when it buys government bonds from the public. The Fed buys the bonds on the open market and pays for them by creating new checkbook money. The new money is therefore created without any additional debt appearing in the economy. Jaikaran's central thesis that new money is created only through new bank lending is thus countered by the facts that banks create debt-free money when they pay their operating expenses, purchase assets, and disburse dividends, and that the Fed creates debt-free money in the process of buying government bonds.

[MonteQuest]

$this->bbcode_second_pass_quote('kjel', 'H')ere's someone else's take on this debate Myth #11: The Antidote to the Debt Virus

$this->bbcode_second_pass_quote('', 'T')he other major flaw in the Debt Virus hypothesis is that it ignores the role of the central bank in the money-creating process. The Federal Reserve creates a measure of debt-free money when it buys government bonds from the public. The Fed buys the bonds on the open market and pays for them by creating new checkbook money. The new money is therefore created without any additional debt appearing in the economy. Jaikaran's central thesis that new money is created only through new bank lending is thus countered by the facts that banks create debt-free money when they pay their operating expenses, purchase assets, and disburse dividends, and that the Fed creates debt-free money in the process of buying government bonds.

[MonteQuest]

A quote from kjel website:

$this->bbcode_second_pass_quote('', 'B')ut what of the banker? Initially, no one has any money and only he can create it. How will the banker purchase the sustenance he needs from the farmer without the money to do so? How will he purchase clothing or acquire medical services? Why not just use the same pen which magically created money to lend to the farmer, only this time use it to purchase the necessities of life? Doing so would add new money to Planet Doom's economy without creating additional debt for the rest of the inhabitants to repay. This is the primary flaw in Jaikaran's story. The banker is not an ethereal entity. No, he is a living, breathing person who needs to purchase the products and services which make life possible and enjoyable.

Banks are no different in the real world. Commercial banks and savings and loans have expenses to pay just like any other firm. They must pay their employees, purchase office supplies, and meet the other expenditures which are a part of doing business. When they do this banks spend money back into the economy withoutany debt being created to burden the non-bank public -- debt-free money, to use Jaikaran's terminology. The revenues banks collect from interest on loans and other services do not disappear into an economic void. Instead, those revenues are used to meet the bank's operating expenses, to purchase assets to generate future income, or are paid to the shareholders as dividends

[kjel]

$this->bbcode_second_pass_quote('', 'A')ll I see from your argument is a "cut and paste" retort. Obviously, you have no basic understanding of these concepts and cannot articulate them in your own words.

[backstop]

Monte - don't be aggrieved - maybe you know the old line that,

"You can take whore to culture, but you can't make it think" ??


regards,


Backstop

[MonteQuest]

$this->bbcode_second_pass_quote('backstop', 'M')onte - don't be aggrieved - maybe you know the old line that,

"You can take whore to culture, but you can't make it think" ??


regards,


Backstop

[nero]

$this->bbcode_second_pass_quote('MonteQuest', 'A')h, after reading that BS I feel like a god-damned fish! This is too important an issue for me to waste so much time on it like this, and have a good thread end up cluttered with inane arguments, double-talk, and outright crap. Who in their right mind would want to wade through all this "cut and paste" mush to sort out the salient and helpful facts?

[MonteQuest]

$this->bbcode_second_pass_quote('nero', '')$this->bbcode_second_pass_quote('MonteQuest', 'A')h, after reading that BS I feel like a god-damned fish! This is too important an issue for me to waste so much time on it like this, and have a good thread end up cluttered with inane arguments, double-talk, and outright crap. Who in their right mind would want to wade through all this "cut and paste" mush to sort out the salient and helpful facts?

[Canuck]

$this->bbcode_second_pass_quote('MonteQuest', '
')Well, I have learned my lesson, and I hope I haven't sullied my name too badly in the process. One of the problems with complex issues like this, is the inherent difficulties of coherent discourse via a "chat room forum." So much is lost in the translation. To post or not to post, that is the question.

[MonteQuest]

$this->bbcode_second_pass_quote('Canuck', '')$this->bbcode_second_pass_quote('MonteQuest', '
')Well, I have learned my lesson, and I hope I haven't sullied my name too badly in the process. One of the problems with complex issues like this, is the inherent difficulties of coherent discourse via a "chat room forum." So much is lost in the translation. To post or not to post, that is the question.

[jato]

It's 9 months later and the biofuels debate has prompted me to resurrect this thread. Here is my comment from the biofuels debate:

$this->bbcode_second_pass_quote('jato', 'Y')ou have answered my question: Biofuels can't replace oil.

Therefore the larger peak oil argument reverts to growth. Does our economy require growth? Can our economy live with continuous contraction? My questions are off topic and for a different thread.

[jato]

$this->bbcode_second_pass_quote('JohnDenver', 'E')ven when we face peak oil, we will not be facing peak energy. You're conflating the two when you should be making a clear distinction. Basically, all the other sources still have plenty of room to grow. Peak oil may be imminent, but I haven't seen any research to suggest we are facing peak energy soon. Have you?

[Permanently_Baffled]

Come on guys lets face it , this economic paradigm is dead.

The economy reminds of my domestic finances, imagine if your income fell by 3% every year but costs rose by 10% every year.

At some point your income is unable to cover the minimum payment on your mortgage and or credit cards/personal loans.

The result is bankruptcy and/or the bank sells your house and all your belongings to recoup the loan.

Surely it is the same thing for USA plc (or any country for that matter).

For example, when we enter permenant recession , then government receipts via tax will keep dropping whilst expenditures increase (unemployment benefits etc etc). At some point there will not be enough income for the government to cover the interest on the national debt.

The result is of the above example is an Argentina type collapse?

Not pretty.

PB

[venky]

'The growth economy' is a relatively recent development starting with the industrial revolution about 250 years ago. For most of history human societies have been built around what could be described as a steady state economy.

Even in the modern age there have been times when economies have contracted for example the US during the Great Depression or more recently when the Russian economy contracted almost 50% after the collapse of the Soviet Union. Although these were turbulent times with great suffering for large sections of the point is that the economy as whole can survive and not collapse.

Eventually there will be an equillibrium point, perhaps even a time when a there can a net energy increase again. From an earlier post, I hope it will not be a few villagers harvesting a small wheat crop.

[jato]

$this->bbcode_second_pass_quote('', ''')The growth economy' is a relatively recent development starting with the industrial revolution about 250 years ago. For most of history human societies have been built around what could be described as a steady state economy.

[JohnDenver]

$this->bbcode_second_pass_quote('jato', 'H')ypothetically speaking John. How can our economy, which is dependant on growth, be allowed to “contract” year after year?