I just learned something about economics

[Dan]

Did you know that all monetary wealth in the United States cancels out. Money isn't backed by gold or anything anymore, it's all backed by debt. So if everyone payed off their loans there would be no money in circulation. Interesting eh?

So when you go to the bank, and borrow money, you are creating debt out of nothing and in return they create money out of nothing, but then they charge you more money for your debt in the form of interest. Because you can't borrow more money from the bank to pay that interest without accumulating even more interest on top of it, you have to get the bank to give you money without any debt to pay back the interest that you owe them.

The way you get the bank to give you money without you giving them debt is that you get a job doing work for the bank ,and they pay you for it, and then you give the money back to them to pay off your interest. (Or the bank pays someone who pays someone who pays you). Ultimately it's got to be a closed loop though and all the debt and money has to cancel out. So basically the bank profits from the wealth you create when you work by charging interest when in fact they are just creating money out of nothing.

 

[Solaris]

Interesting.

 

[Dan]

Tt's a little bit more complicated with treasury bonds and reserves, but it all works out to the same thing in the end. Money is based on debt.

 

[kirovman]

What goes up must come down...

The banks and building societies are offering more and more loans and mortgages to poorer and poorer people on higher and higher multiples of their income, in order to keep the "booming economy" and house price inflation, etc going.

 

[The Monkey]

They told us that US dollars always could be traded for gold.

 

[tehsolace]

Interesting. So does that mean that the higher into national debt we go, the more money we are supposidly making?

 

[Dynasty]

Precisely.

 

[zleppelin]

the govt is stupid why dont they print more money to pay for their debts lol;

 

[kirovman]

the govt is stupid why dont they print more money to pay for their debts lol;

North Korea is kind to America. They print off loads of (fake) US dollars.

 

[xcellerate]

Money used to be backed by gold. One dollar symbolized that amount in gold, so theoretically you could walk up to the bank and request that amount in gold...although it's hard to buy a cheeseburger with gold.

 

[Solaris]

Yup, it was called the 'Gold Standard'.

 

[kirovman]

The Petro-Dollar is more powerful nowadays.

*Kirovman takes oil barrel to McDonald's

 

[PvtRyan]

The current exchange rate for rape-dollars is excellent

They're backed up by nothing less than pure RAPE.

 

[zleppelin]

i don't get it

 

[Javert]

the govt is stupid why dont they print more money to pay for their debts lol;

Germany tried doing that after World War I. Didn't work too well.

 

[bliink]

They told us that US dollars always could be traded for gold.

Not anymore, not since some number of decades (IIRC).

Most of the world no longer backs currency with gold.

 

[Naudian]

I never fully understood any of this, still don't, and probably wont for a while.

 

[Que-Ever]

lol back it with rocks

 

[Naudian]

But only rocks that can skip across water well. Those rocks kick ass.

 

[<RJMC>]

me confused

so the USA is rich cuz everyone owe money?

 

[bliink]

lol back it with rocks

There was an ancient society that did in fact, use rocks as currency. They were big huge stone wheels, and stacking 5 or 6 up in your front yard would have shown everyone what a millionaire you were.

 

[theotherguy]

Precisely as Alexander Hamilton speculated.

The national debt is the only ultimate source of revenue for the government, and other debts are the only source of revenue for everyone else. People are willing to accept credit to pay off their goods and services, so its a large cycle of debt being paid.

However, this is only really true on a national level. Internationally, countries owe real goods, exports, imports and such, which results in national debt. The country is kept afloat by the assurance of our international creditors, and if they wanted debt paid then our economy would crash instantaneously.

 

[B.Calhoun]

But only rocks that can skip across water well. Those rocks kick ass.

the white rocks are better