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Old 29-04-2012, 06:37 PM   #54
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Originally Posted by aulus agerius View Post
Money is not the same as a contractual promise to pay between a debtor and a creditor. The 'promise to pay' in money is the promise of the central bank. The chances of a default by the central bank is some remote that few people ever think about it. As a result of this, and laws requiring the acceptance of nationally recognised currency means that money is easily used as a medium of exchange. The promises of ordinary people or even large companies are not so easily exchanged (or "negotiated"), in part because someone not party to the original transaction who does not know the debtor is unlikely to be satisfied with just his word that he will pay.
Every "loan" from the banking system starts as a promise to pay. They monetize these promises.

There is always the possibility of default, even without interest. Take the A & B house building example. Suppose that A looses his job halfway through construction. B will be left with a bunch of materials and with work half done an no way to get paid. He doesn't have an collateral as valuable as the loan.
Why do you think B will have no way to be paid? Can he not sell the house to someone else?

I've heard many people say this, but have yet to see good evidence for it. If you have some, let's see it.
The banking system wants us to believe that they loan out money from deposits. How can this even be true? Which depositor is missing money from his account when a new loan is made? It is pretty obvious that the loan is new money created by the promise to pay.

The value of money over time is much the same as the value of any other piece of property over time. Let's say C has a load of money and D doesn't. D wants to use C's money. D says, fine, but I want to charge you rent for using my money. That rent is interest. Would you compel D to lend his money? I doubt it.
But money is not property. It has no value beyond the actual property it is entitled to. Imagine if you had $1,000,000 dollars but were stranded on a deserted island. What good is the money to you. It's useless. Real property like food clothing shelter is what has value. We have been fooled into believing money is a good.

I don't think that this is correct. The amount of money in circulation is not a constant. This goes back to the idea of money being "loaned into existence" so once again, let's see some proof.
I didn't say the volume of money is a constant. Actually, the volume has been growing exponentially. But, contrary to what bankers and economists would like you to believe that increasing the money supply causes inflation, in actuality, as more money is reborrowed to pay principle + interest, the cost of servicing the debt becomes higher and higher. This causes deflation because there is less money available for commerce. As a result business must increase prices to cover the increasing costs of servicing the debt.

There is a certain attraction to the underlying idea: cut out the middle men (banks) and attempt to sell your own promises to pay. However, there are also a number of problems. First you assume that "the infrastructure is there to monetize our promises to pay" What exactly is this infrastructure? How do we know it is secure? How is it funded? Who created it?
The infrastructure will be setup upon implementation of MPE. It's as simple as a computer network. It can be at minimum, as secure as the current banking infrastructure but we can also increase security if people are willing. It can be funded with a service fee for each transaction.

Second you say that "the seller gets his money right away". I assume that you mean B the builder in the example and that by "gets his money" you mean gets a promise of payment which he himself can then use to pay other people. This presupposes the willingness of the people whom B needs to pay to accept a slice of A's promise to pay in exchange for their goods or services. B will need to give pieces of the promise to pay to different people - the manufacturer who makes bricks, the electrician who will do the wiring, the butcher who sells the meat which B needs to feed himself and his family, and so on. Under the present system, these people are not compelled to accept A's promise to pay B (or, presumably, B's assignee). I doubt any of them would.
Under the present system, they are compelled to accept the banking systems published evidence of our own promise to pay and government enforces it. So instead of giving bankers the privilege of having a monopoly to publish this evidence of our promises, we can do it ourselves through a Common Monetary Infrastructure and government can enforce these also.

But let's suppose that they do. You are still assuming the existence of conventional money: A is still working and getting paid and some of his pay is going to go to make payments as promised to B. So, what happens to that money, when the time for payment comes? Does A pay it to B, who then pays it out to all the people he sold A's promise to? Does A have to pay the people B paid with his promise directly? This is beginning to look rather complicated and impractical.
I think you are confusing the process. Our promises to pay become monetized. They become money. The seller receives the buyers promise to pay in the form of money ie cash, check, wire transfer etc...

You also say that there is no risk because there is "obligatory schedule" and that if A defaults at any point the outstanding value of the property will equal the outstanding value of the obligation to pay. First, where does this "obligatory schedule" come from? Who makes it obligatory?
We make it obligatory. The the payments must be paid back to the CMI that retires the money out of circulation.

Second, how is it that the value of property will always match the value of the obligation to pay? I don't think it will. Look at the example of A and B. A half built house is not worth as much as it costs to build half a house. People will not buy a half built house for what has been spent building it. Even a completed house will vary in value. Let us suppose that A's house is built and B is living there. All is well and good until there is a big flood. The house is effected. Because of the flood the house will not be worth as much because people will not be willing to pay as much for it. The same is true of all sorts of natural and human events which can raise or lower property value.
Why can't we insure the house?

Consider another, better know example. Suppose that E sells F a new car on F's promise of later payment. A soon as F drives the car off the forecourt it is worth significant less than he just promised to pay for it. If F simply defaults on his promise, getting back the car will not recover the whole of the amount of the promise. People simply do not pay as much for second hand cars.
Again, we determine the schedule of payment. So, in the case of the car a down payment is required and payments can be higher at the beginning of the loan.

On the whole, I don't see that attempting to monetize all promises of payment is really a solution to anything. It certainly does not remove risk and it will not remove the potential for people to make profit out of lending out their resources.
Take some time to really understand MPE and you will see how it is the only solution to the problem.
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