Felix

You are right. My point is that the money supply is finite. How can it not be? Usually, within a large area there is only one currency around. And all debt-contracts are therefore written regarding this very currency. The contract says: I give you 100 gold coins now and you give me 105 gold coins in a year. Now if you come along in a year and tell me: I have only 100 coins but I will give you this beautiful painting (or this fish, or RAM chip, or whatever), you are in trouble, because you have broken the contract. This doesn't mean that the currency stops flowing around, as it is usually invested and thereby in circulation and demanding interest. This means that usually most people have some of that currency to trade. But still the problem remains. If all the money is lent and demands additional 5% (which don't exist), people will compete hard to get enough of the existing currency, because not everyone will get enough. Now it is still possible to succeed in a new business venture. But not everyone can win as some will fail to monetize their newly produced values, because that money simply doesn't exist and they will break their contract of debt.

No, sorry. The thing is that the gold would be in circulation to attain interest. They won't let it sit in their basement. It would be borrowed to make more money (gold). And that money(gold) isn't there. This would make some people lose out despite having produced a lot of value. That's also what I mean with monetization. These people sell their goods and services to pay back their debt plus interest (and profit). But even that interest isn't around. And all that fixed money supply that is traded would have to be paid back with interest at a certain point in time. You can't just wait longer until one guy paid off his debt to then use that to pay it back. Your debt is due at a certain time. And if you can't get it then, you have lost. (see my response to Capitalism Forever) Please tell me how and why exactly this is wrong. I think then we will be making progress here. Thank you all, guys. Especially for your patience.

Hm. Okay. I agree that this wasn't the best way for me to start the discussion. I really should have started this from another angle. But I read that book on Debitism and it made a point (at least to me). I also understand that if this theory is right, then a lot of things Ayn Rand said would be wrong. This is exactly why I am posting this theory here and trying to defend it. This theory goes against a lot of things I held as true myself for a long time and I want to know for sure. My problem is that this requires Jim to spend his money. And he has to spend it before the debt to Tom is due. This is highly unlikely, especially since Alex borrowed his money from Jim and Tom at the same time which makes this actually impossible.

Hm. Then the universe is an entity. Boy, am I puzzled now.

As long as there is only barter trade, there is no problem, even with money. The problem starts the moment debt comes into place. My problem is this: If you borrow a certain amount of money at 5% interest, you have to get that money plus interest back from the market in, say, one year. Now if this sort of lending/borrowing is done on a consistent basis with compound interest it results in a concentration of money. Let's be benevolent and say that there are 250.000 metric tons of Gold available on earth in total. At least the currency available is finite. That is my point. Now let's say that by production and trade I (and 99 other people) have been able to get one of these metric tons of Gold. If all these 100 people invest their gold at 5% interest(compounded), there is not enough Gold on earth to fill the rising demand in 161 years later. The actual numbers are irrelevant. The problem is one of basic structure. The point is that the amount of currency is finite and that compound interest creates (over time) a demand for currency that can't possibly be met. With paper money the problem is similar. There is only so much money in circulation right now. New money can now not be mined like gold (which at some point can't be mined anymore, too), it has to be created by a corresponding rise in debt. There is no other way out of this as far as I see it. The problem is not that additional value can't be created. It can. I seriously believe that a 5% rise in this product/benefit-wealth is possible. But what is missing is the currency that corresponds to that 5% rise. Where does that come from? If the world economy is rising by 5% in product/benefit-wealth, where does the additional currency come from that pays for it? In other words: How do you monetize your profit? If you lend money, you put 100$ into the market, but you have to get 105$ back. How is this possible on a consistent basis? Where do all these additional 5$-bills come from?

I've heard Walter Block (Austrian economist) call them watermelons. Green on the outside, red on the inside.

Paper money is a debt certificate. Gold is a commodity. These are different things. Paper money can be easily produced, yes. That's the reason some guys try to create counterfeit money. Paper money derives its value from the fact that it is backed by some value (or at least it should be). In addition to that, paper money is a currency by law (you can substitute "by force" for that). You have to accept paper money as payment. And gold doesn't derive its value from the work it takes to get it but from the benefit it has to people. Competition usually drives the price down - closer to the "value from the work".

Thanks again fatdogs12 for your good and lengthy example. I agree with everything you described. But my point was something different. You described economy and debt relationships in a barter system, where goods are produced and exchanged. In your example it is possible to pay off the debt by creating more goods as the debt is to be paid in goods. I agree that if this is the case, there is no problem. My problem is that I think that this picture changes completely when money enters the picture. You may be able to create additional goods, but you can only create additional money by accepting a corresponding debt (in todays partial-reserve banking system). In a pure barter economy, this is even impossible. Hm. Maybe I can illustrate it this way: Jim and Tom (the two rich guys on the island) have five gold coins each, which amount to all the gold there is on the island. (This makes sense because gold doesn't rot (unlike fish or other food), it's the perfect means to conserve value) Jim borrows his 5 coins to Alex and so does Tom, each wanting 6 coins in return three months later. At this point Alex is screwed as there are only ten coins in existence and he has to bring back twelve. Let's say that he spends his ten coins and builds a ship and fishing net. He then uses that to catch more fish than anyone else, but it doesn't help him at all. His contract says that he has to pay back in gold. And even if he manages to get all the coins back and has a ton of fish and a ton of fruit, he can still not pay back his debt because he lacks two coins. Now this example was extremely simplified to make a point. Usually there are more people involved, keeping this from being as obvious as I made it above. These are the simplifications: 1) There are no other coins is circulation Even if there were at some point other coins in circulation, they would - in the end - end up in Jim's or Tom's hand. 2) Alex is the only one who borrows Let's say Alex only borrows 5 coins from Jim and Palo borrows 5 coins from Tom to build a mango-picking device. Now at best one of them will be able to pay back his debt while one of them will necessarily fail. Alex will win and Palo will lose. My point here is that the existence of borrowed money completely distorts this barter situation. A money economy is fundamentally different from a barter economy.

I'd say that what happens with your body after your death has to be part of the testament.

But teaching some evening courses doesn't have to require a degree. The organization in Germany offers courses on everything ranging from Digeridoo-playing to Zen-Buddhism. And the people teaching that don't have a degree either. There must be an organization like that in the US.

As long as it's in the realm of what you are allowed by the license, it's okay. You only have the CD by the terms of those who produced it. It's part of the buying contract and therefore valid. That's what I think about the morality of this. I don't know the current legal situation.

The moment you go to the bank and say: I want a loan. Then the bank books money to your account and books your debt on its own to balance the sheet. You then spend that money on goods someone has produced. He then uses it to pay back his debt plus interest. (Well, actually this is usually a company - Single people don't build cars.) Now you are the sucker, because basically he transferred his debt plus interest over to you. Now you have to work to pay back your debt (plus interest, which doesn't even exist in the market, yet). You have to find the next sucker. And at some point, there is nobody to be found and the whole game crashes. The government would pay it back with stolen money. But how? Paying it back would lead to deflation corresponding to the prior inflation. Prices would fall to pre-inflation-level. And they would fall quickly, causing companies on a wide range going bankrupt because they are now unable to pay back the debt they financed production with. And new companies wouldn't start. Hardly anyone would take up new debt. And then there isn't even enough money to go around to pay back the principal. And I doubt that - for example - Japan is capable of paying back its debt. Don't they have a debt of around 120% of the GDP? How do you pay that back? Germany has debt of 60-70% of the GDP and they have trouble paying even the interest and they take on new debt every year. The perfect government debt is zero.

Christmas is about Mr. Hankey. I saw it on television.

I've read a funny one on that: How come UFOs only abduct complete idiots?

You spend the money, that is correct. Otherwise you wouldn't borrow it at interest in the first place. But the money you spend is still booked to the account of whoever gave that money to the bank. And you usually don't spend your money cash, do you? You have a credit card or a check and the money wanders from account to account by nothing but changing numbers. The bank has created money out of thin air. The funny thing is that it is up to you to now create the actual value corresponding to the debt you have to pay it back. By doing so you back the new money created with corresponding services and products and everything is fine. And if you can't pay your debt, you go bankrupt, the debt is deleted and the bank has suffered a loss. So far that's not a problem. The problem starts with government debt, which is not paid back. This is what creates inflation: Debt, without anyone taking the effort of backing it. It creates new money without creating the corresponding services.

What does this "Whole Language Education" actually consist of? The link didn't really provide anything of substance. I also don't know this phonics theory. Is it only used to teach reading or also to teach writing? Because I doubt that it's useful for the latter. Anyway, I would have given it another name. If what Hal said is true, according to phonics it is pronounced: p-honics. Not a very smart way to start.

In a fiat system, money can be created without actually being backed. It is, however, booked that way. So every Mark created was "backed" by the government. So every new Mark had a corresponding debt booked, which makes the sum zero. For the new money, a corresponding debt is booked, but it is not backed by any goods. It's in the nature of the paper money system with partial reserve banking. Money appears that is not backed by anything. And once people find out (when it's too late), it all breaks down. To push the farce a little longer, the government may try to print as much as they can, which will naturally stop once the money isn't worth more nominally than producing it costs. That system is inherently instable. Every inflation has to end in a crash.

Would you mind telling me why? Because I, for one, accept the idea that the exchange paradigm doesn't hold in a fiat money economy.

I just came up with another idea: How about teaching classes on your areas of knowledge to adults? You could even use the "I built a pirate radio in my basement"-thing as a benefit in your ads to show your level of expertise and to make you unique. We have an organization in Germany which offers courses for adults in brochures and you can use them to do all the marketing and they even offer the rooms. I guess in the US this is called the learning annex. I think I once heard that. However, I'd bet there is such a thing in the US. Since there are several things you are interested in, you could offer courses covering these subjects. It may take some time to prepare such a course, but once it's done, all you have to do is show up and be yourself. You could offer several courses on electronics, video, audio, radio. This is stuff people want to learn.

Writing my treatise may take longer than I suspected as I have to devote most of my time to exams now. I will write a summary of that theory but definitely not until next week. I have other things to do right now. However, I'm interested in that subject too much to drop this task. Just so that you are not all disappointed by the delay, here's a link to a dissertation on the subject, which was published as "Money upside down", which I already mentioned above. If you want a summary, you will have to wait or have someone else write it before I do.

I did this with Noah on the forum today for about 2 or three hours. I think he finally understood my point, but then he dropped out of the chat due to technical difficulties. I am exhausted right now, so I will leave it at that. I'll try to write a complete explaination. But it may take a while. But I have found out that there is a book on the theory of debitism written in English. It's called "Money upside down". I haven't read it, however, but saw it on a reading list while searching for debitism-related sites online. It's hard to defend a theory with practically no references. You have to do everything on your own. And this is hard for a layman on that very theory. Maybe I shouldn't have started with such a controversial title. But at least now I have everyone's attention.

1. That's my point. One man's money is another man's debt. 2. we have debt of -100$ and money of 100$. That makes zero, doesn't it?

Then you should know that this is today's common banking procedure. Your account is only backed by about 20%. And in case you didn't know: Your Dollar bills are backed by the future work of Americans, not gold. And my point is that the debtor has a debt of the amount of the money he borrowed from his creditor on his shoulders. So we have: A legal title to getting money from me (my debt) and the money I received from the creditor (money). That legal title is additional money.

Yes. That's my problem. I think that this definition of the economy leads to wrong conclusions. Money is not a good. Gold is a good. Silver is a good. Coins are such "little pieces of goods" that can used for more effective barter. But money doesn't have to be coins. It can be a number on an account sheet at the bank while the coins are in circulation again. Money is an option to get a good. And coin money is already backed by itself, so to speak.

Yes, borrowing allows you to exploit government-created erosion of monetary value. The way old debt is paid for is by larger new debt to others. It's a bit like a ponzi-scheme. I don't know the name, but I know the theory: Money only exists to make barter easier.