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Old 27-04-2012, 03:45 PM   #41
jon galt
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this my understanding on money as debt.

A person borrows money from a bank fe $10. and agrees to repay the the bank is up $5. I would say the borrower created the $5 through his earnings/source of income.
wealth of a country is produced through production.

The other part what I don't quite understand about debt creating money is,

Now that the person has taken this loan the bank now has an asset worth $15, but should the person not pay back his loan this asset would become worthless leaving the bank - $10. Making any share in the banks assets fall in value.

In what way is money created, rather than share prices rising.
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Old 27-04-2012, 05:19 PM   #42
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Regardless if debt has interest, taking dept is living beyond your means, payed back from future earnings. Debt could still cause problems with out interest, and there would be few people willing to lend out of kindness.
Jon, what sounds more fair,
You save for 30 years while living on the street and then you pay for your house.
You take on a debt and pay for the house as you live in it with your labor.

The 1st problem is the 'obfuscation of the currency'. The fact that you have been tricked into believing that someone has to lend you money. When you go to the bank for a loan, they don't lend you existing money. You hand over a promissory obligation and they merely publish the evidence of that obligation in a legally enforceable form. What lawful consideration have they given? Nothing. They have no legal right to charge interest without lawful consideration.

The solution is Mathematically Perfected Economy™:  mathematically perfected economy™ (MPE™) is the singular integral solution to 1) inflation and deflation, 2) systemic manipulation of the cost or value of money or property, and 3) inherent, irreversible multiplication of debt in proportion to a vital circulation, engendering inevitable systemic failure at a finite system lifespan defined by an inevitable, terminal sum of insoluble debt. Mathematically Perfected Economy™ is every prospective debtor's right to issue their promise to pay, free of extrinsic manipulation, adulteration, or exploitation of that promise, or the natural opportunity to make good on it.
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Old 27-04-2012, 06:11 PM   #43
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You do know that wikipedia is not exactly the most comprehensive resource on Islamic finance right?

My example was deliberately simplistic so that it would be easily understood and dealt only with the "interest free" point because that was the point raised. If you believe that "interest" is the problem, the Islamic finance is not a solution because in substance it still involves interest.

It does certainly have some advantages, but many of those relate as much to cultural attitudes towards debt as to strict law. Views on penalties for late payment, for example, vary: some think they are acceptable in the case of a debtor who can pay but refuses, while others think that they are unacceptable in every case, and yet others permit them, but require them to be donated to charity. The general prohibition on uncertainty in contracts also has advantages in relation to consumer credit, since to makes it possible for the consumer to know with a higher degree of certainty what they will pay.



As you say, big difference from the current system, however, the big difference is not the absence of interest.
The restrictions can also be problematic: in theory they ought to lead to higher interest rates for borrowers; they would lead to greater bank ownership of assets (note that in my "conventional" example, money is lent directly to the consumer, whereas in the Islamic example, the bank itself buys the goods and sells them to the consumer, this is even more true of the lease-sale type of Islamic finance deal. In addition, Islamic finance comes with some restrictions which are essentially religious: you couldn't, for example, use Islamic finance to invest any of the various products forbidden by Islam (such as alcohol and pork).

Islamic finance is also capable of resulting in unaffordable borrowing - consider, for example, the Islamic bonds of Dubai's Nakheel company: through those Dubai borrowed unaffordably and had to be bailed out by Abu Dhabi.
my point is profit and interest amount to the same thing as i think you would agree. the question is how many people see the unsustainability of such a thing no matter what you call it. islamic banks merely covered the "sin", if you will, by coming up with rules and terminology that claim to make a difference but dont. doesn't anyone recognize the practical reason for usery to be called a "sin"? its a very practical reason and has nothing to do with morality really. after all, "god" didn't care if his people practiced usery on the goy, they were just not to practice it on their brother...meaning in their community....meaning their financial system was a closed system...as all are. what is the net effect of profit in a closed system??? think.
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Old 27-04-2012, 07:19 PM   #44
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You are right Jim. It's very clear what would happen. Yet, we have this crap video above telling us interest is okay, it's the debt that's a problem.
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Old 27-04-2012, 08:36 PM   #45
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my point is profit and interest amount to the same thing as i think you would agree. the question is how many people see the unsustainability of such a thing no matter what you call it. islamic banks merely covered the "sin", if you will, by coming up with rules and terminology that claim to make a difference but dont. doesn't anyone recognize the practical reason for usery to be called a "sin"? its a very practical reason and has nothing to do with morality really. after all, "god" didn't care if his people practiced usery on the goy, they were just not to practice it on their brother...meaning in their community....meaning their financial system was a closed system...as all are. what is the net effect of profit in a closed system??? think.
Ok so how would banking function with out profit?

The only option that i can see is nationalisation, and although i agree in most part i do have doubts. Fe would free man not feel the same about the government collecting a private debt as they do with council tax? What about people who can not repay back their debt. Nationalization of the banks also puts the government in the position of having to collect debts in some cases reposessing their voters homes.

I do agree that private banking creates an unnecessary middle man for its function.( as with other buisneses fe electricity companies all selling the same electricity at different rates, the some how is supossed to premote competition, giving the customer the best service at the best price which seems daft as the middle man gets his share also)

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Old 27-04-2012, 09:21 PM   #46
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Jon, we don't need banks to publish evidence of our promissory obligations. We now have the technology to do it ourselves.

Why would someone not be able to pay back their obligation? As long as they can work, they can repay. When their is no interest on the debt, we pay 1x the value of the good we are purchasing, not 3x - 5x. We can repay the "debt" with equal production, not 3x - 5x production like we do in the system now.

MPE is the solution! Here is an excerpt from the website: www.perfecteconomy.com

THE NATURE OF "MONEY"

Nonetheless, the one just nature of money is elementary.

When someone builds a home for us and we do not already have the money to pay, the builder may accept our promise to pay ("note").

Given integrity to this useful arrangement, the assumption of such debts permits every such producer to prosper immediately and to the full extent of their capacities, even as their production may ultimately be bought and consumed even long after their own lifespan.

The same assumption of debt further permits consumers to benefit to their full capacities. So long as debtors pay as they consume of the related property, they do not receive anything for nothing; and only if they do exactly so; and only if their debts are not subject to exploitation by extrinsic, intervening parties, is it possible to solve inflation and deflation, multiplication of debt by interest, and systemic (undesirable) manipulation of the cost or value of money or property.

Why?

The answers are simple:

To solve inflation and deflation, we must maintain a circulation which is always equal to the remaining value of represented wealth. Thus with the original principal being loaned into circulation, the only solution to inflation and deflation is to pay off a resultant monetary obligation equal to the original principal, at the rate of depreciation or consumption.

If our debts to each other are subject to exploitation by extrinsic, intervening parties, we cannot maintain a circulation which is always equal to the remaining value of represented wealth, because the exploitation itself requires us to pay more than the original value of the property out of circulation.

Because a monetary system only has the potential powers to manipulate the cost or value of money or property through inflation, deflation, and/or multiplication of debt by interest, systemic manipulation of the cost or value of money or property therefore is solved only by integration of solutions for inflation and deflation, and multiplication of debt by interest.

Multiplication of debt by interest is solved only by eradicating interest.

Thus by abiding by only the few relevant, incontrovertible principles, we have a singular prescription for true economy in which the value of money is preserved perpetually, in all cases, by maintaining a constant 1:1 relationship between the circulation and remaining value of the represented wealth. Only by this one explicit cycle of circulation does the value of the circulation always equal the remaining value of the wealth. Only by this one explicit cycle of circulation is all the circulation at all times redeemable in exactly the wealth it is intended to represent. Only by this one explicit cycle of circulation do we pay for each other's production with an equal measure of our own. Only by this one explicit cycle of circulation are further "monetary standards" or "reserves" wholly redundant, even as those purported monetary standards or reserves are wholly incapable of protecting us from inflation and deflation, systemic manipulation of the cost or value of money or property, and inherent, terminal multiplication of debt by interest.

Only by eradicating the combined evils of the present exploitation in fact then, can we sustain all naturally possible prosperity, without redundant, extrinsic cost even in one single case — and thus, only so do we achieve true economy in every case, without inflation or deflation; without systemic manipulation of the cost or value of money or property; and without fatal, irreversible multiplication of debt by interest.

And so — as opposed to the present exploitation, and in understanding the present magnitude of escalating, terminal oppression — we would universally understand that under mathematically perfected economy™ instead, in the case of a $100,000 home with a 100-year lifespan, we would pay for the home at the overall rate of $1,000 per year, or $83.33 per month, simply for eliminating exploitation and its accompanying irregularities from an imposed, falsified, and purposely destructive equation.

This incumbent understanding of course would leave little question how much further we would prosper in all related ways under mathematically perfected economy™.
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Old 28-04-2012, 07:15 AM   #47
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Ok so with out interest on loans, how does a bank make profit and pay its costs to function or even pay its staff? What incentive does any one have to loan money if the borrower pays exactly what they borrow? Unless there are hidden costs in this system, shuch as fees for taking the loan ect, which as AA explaines has a similar effect to interest allthough more hidden.

Then in the event that not every one does or can repay their loans ie job loss, who covers the banks losses?

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Old 28-04-2012, 09:45 AM   #48
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Ok so with out interest on loans, how does a bank make profit and pay its costs to function or even pay its staff? What incentive does any one have to lown moneyif the borrower pays exactly what they borrow? Unless there are hidden costs in this system, shuch as fees for taking the loan ect, which as AA explaines has a similar effect to interest allthough more hidden.
Then in the event that not every one does or can repay their loans ie job loss, who covers the banks losses?
THE PURPORTED QUESTION OF WHO SHOULD ISSUE THE CURRENCY

In order to represent the related obligation, currency comes into circulation as a debt. In order to duly represent the wealth, its trade, and its consumption, in mathematically perfected economy™ the debt is not subject to interest, the related obligation is not multiplied by unearned taking, and the unmultiplied obligation is paid at the rate of consumption of the related asset.

Regardless of whoever issues the currency, the real debt is to the producer of the wealth, who accepts the currency as a token of the resultant obligation.

Ordinarily then, a debtor would issue a note (promise to pay) to the possessor/producer of wealth, who is the real creditor.

The natural creditor is not loaning the debtor money, for none exists for the transaction or the debtor would not have to issue a note. Under these natural conditions then, the debtor is the natural issuer of money.

Not only are the people the natural issuers of money then; it is necessary to issue just this money at this juncture of the distribution of new production, or we suffer deficient circulation to sustain commerce (deflation).

Moreover then, without a further devised monetary system, no one even could reasonably issue promises to pay (money), but debtors.

WHY ACCEPT THE DEBT WITHOUT INTEREST?

So if *we* took these debts with interest, then should we need alike to issue or accept credit, our taking and paying would cancel each other's, and there wouldn't even be any ultimate point of this.

Furthermore, especially if different rates of interest might be presumed, we would involve ourselves in much effort and even strife, determining a just rate of interest which still would inevitably cancel in the paying and taking of just interest.

But any preoccupation with interest would absolutely be for nought if we could eliminate potential loss to every creditor, that we cannot even say risk exists, ostensibly to justify interest.

How would we do that?

Even presently in fact, government already attempts to ensure that creditors are delivered on debts, even as the very interest of the imposed monetary system introduces an entirely artificial risk, and multiplies that artificial risk until fulfillment of the perpetually multiplying obligations is inevitably impossible.

So the structure and even the intent already exist, except that the interest of the purported monetary system ultimately makes the success of the system impossible.

But in mathematically perfected economy™ (alone), the remaining value of the related property *always* makes it possible to recoup the remainder of the entire remaining obligation in the form of the very property itself.

So mathematically perfected economy™ imposes no risk or stress on the present infrastructures, which can be extended little to represent their further interest of eradicating the consequences of usury.

WHO WOULD LOAN MONEY IF IT WERE NOT SUBJECT TO INTEREST?

No one needs to loan money at interest under mathematically perfected economy™ then, because all necessary supplies of it can be jointly issued and even certified by the natural issuers of the currency — the very people.

mike montagne — founder, PEOPLE For Mathematically Perfected Economy™, author/engineer of mathematically perfected economy™ (1979)
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Old 28-04-2012, 10:37 AM   #49
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assuming this theory could work thus ignoring how money is created. Ie through the central banks purchase of 'financial assets,( this has a direct relation to a states economic out put. If not and the central bank were just printing money, it would be seen as worthless by other countries. Also note that financial assets include the purchase of foreign countries money and government bonds.) It would not work in a capitalist economic system, ie all private business is for profit nor work in a free market system. The only way to avoid that would be state run banks and state regulation, which i do in part faviour. This is why Marx proposed such, he saw and predicted what privet banking would become. That said the soviet economic model was disastrous.

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Old 28-04-2012, 08:43 PM   #50
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my point is profit and interest amount to the same thing as i think you would agree.
I think profit on a loan is indistinguishable from interest. Obviously outside of money lending profits are not the same as interest.
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the question is how many people see the unsustainability of such a thing no matter what you call it. islamic banks merely covered the "sin", if you will, by coming up with rules and terminology that claim to make a difference but dont. doesn't anyone recognize the practical reason for usery to be called a "sin"? its a very practical reason and has nothing to do with morality really. after all, "god" didn't care if his people practiced usery on the goy, they were just not to practice it on their brother...meaning in their community....meaning their financial system was a closed system...as all are. what is the net effect of profit in a closed system??? think.
I think that the history of the prohibition on Riba in Islam doesn't really bear out this explanation: the original prohibition may in fact have been no more than the Prophet's attempt to stamp out the practice of enslaving debtors who defaulted, not the prohibition of interest at all. Even some modern Islamic scholars equate Riba not with interest in the western sense but as a prohibition of riskless profit.
If you look at medieval European history, you will find that, despite the prohibition on lending at interest, the financial system (such as it was) was far from closed: Money was borrowed from useful communities of infidels, and later, methods (in function similar to those of modern Islamic banking) were developed to avoid the canon law prohibition. Some of the most powerful financiers in Europe were the Templars - themselves a military and religious order of the church.

Certainly lending and borrowing at interest can be divisive. However, prohibiting interest is a little like sticking your head in the sand: prohibiting interest is effectively denying the value of money over time.
Take the house building example from the MPE guy: A wants a house, B is a builder. A can't afford to pay the builder now, so promises to pay later. Is a promise to pay the same thing as actual payment? No. Of course it isn't. To start with, A might not be able to pay when he promises to. He might die. Then where will B the builder be? In addition, it is going to cost B money for B to do the work - travel, materials, his costs of living and overheads while he does the work. If B is willing to accept A's promise of payment at all, he's going to want more than if he was paid immediately.
The difference between what B will accept now and what he will accept as a mere promise to pay represents the value of money over time (and the risk that A won't pay).
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Old 28-04-2012, 08:52 PM   #51
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Take the house building example from the MPE guy: A wants a house, B is a builder. A can't afford to pay the builder now, so promises to pay later. Is a promise to pay the same thing as actual payment? No. Of course it isn't. To start with, A might not be able to pay when he promises to. He might die. Then where will B the builder be? In addition, it is going to cost B money for B to do the work - travel, materials, his costs of living and overheads while he does the work. If B is willing to accept A's promise of payment at all, he's going to want more than if he was paid immediately. The difference between what B will accept now and what he will accept as a mere promise to pay represents the value of money over time (and the risk that A won't pay).
An excellent analogy and the way i see it that interest is more paying for a service, the loan more than any thing else. A service that is mutually beneficial or eles the borrower would not take the loan in the first place fe if i lose my cash and use my credit card to pay my trainfair home im more than happy to pay for the money lending service. That said i try to aviod debt at all costs however tempting that may be.

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Old 29-04-2012, 05:49 AM   #52
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An excelent analogy and the way i see it that interest is more paying for a service, the loan more than any thing else. A service that is mutually beneficial or eles the borrower would not take the loan in the first place fe if i lose my cash and use my credit card to pay my teainfair home im more than happy to pay for the money lending service. That said i try to aviod debt at all costs however tempting that may be.
You accept promises to pay now, they just happen to be printed by the banking system and enforceable by law. The problem is the nature of money is obfuscated. Banks do not loan us existing money. They create the money when we sign a promise to pay. They give up no lawful consideration.

What is the value of money over time? Money is just evidence of entitlement. It's all created by promises to pay for something in equal value of our own production. When we allow interest, we as issuers of promises to pay, end up paying 3x - 5x the production for something we should only have to pay for once.

On top of this, there is only enough money in circulation to pay the principal back. The interest charged on top of the principle causes the multiplication of this artificial indebtedness. Having to reborrow both principal and interest to service the loan the debt continues to grow to the point of terminal failure of the system.

In the example of the house under MPE, the infrastructure is there to monetize our promises to pay. The seller gets his money right away. There is no risk for him. Also, because there is an obligatory schedule of payment, the debt is repaid at the rate of consumption of the underlying property, so if a debtor defaults, the remaining value of the property matches the remaining obligation to pay the debt back out of circulation.
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Old 29-04-2012, 06:36 AM   #53
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You accept promises to pay now, they just happen to be printed by the banking system and enforceable by law.
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.
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.
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The problem is the nature of money is obfuscated. Banks do not loan us existing money. They create the money when we sign a promise to pay. They give up no lawful consideration.
I've heard many people say this, but have yet to see good evidence for it. If you have some, let's see it.

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What is the value of money over time? Money is just evidence of entitlement. It's all created by promises to pay for something in equal value of our own production. When we allow interest, we as issuers of promises to pay, end up paying 3x - 5x the production for something we should only have to pay for once.
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.

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On top of this, there is only enough money in circulation to pay the principal back. The interest charged on top of the principle causes the multiplication of this artificial indebtedness. Having to reborrow both principal and interest to service the loan the debt continues to grow to the point of terminal failure of the system.
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.

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In the example of the house under MPE, the infrastructure is there to monetize our promises to pay. The seller gets his money right away. There is no risk for him. Also, because there is an obligatory schedule of payment, the debt is repaid at the rate of consumption of the underlying property, so if a debtor defaults, the remaining value of the property matches the remaining obligation to pay the debt back out of circulation.
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? 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.
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.
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? 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.
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.

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.
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Old 29-04-2012, 06:37 PM   #54
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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.

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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?

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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.

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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.

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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.

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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.

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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.

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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...

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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.

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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?

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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.

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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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Old 29-04-2012, 06:49 PM   #55
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money as debt, if thats no good, then whats the solution?

outlaw interest?

abolishing money altogether?
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Old 29-04-2012, 07:11 PM   #56
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mpe_solution wrote:
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Which depositor is missing money from his account when a new loan is made?
If every depositor attempted to withdraw all their money at the same time they would probably find there is a shortfall.
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It is pretty obvious that the loan is new money created by the promise to pay.
You were asked for proof.
"It is pretty obvious" is not proof. In fact, "It is pretty obvious" is imo an admission that you have no proof.

Last edited by rumpelstilzchen; 29-04-2012 at 07:11 PM.
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Old 29-04-2012, 07:54 PM   #57
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Originally Posted by rumpelstilzchen View Post
mpe_solution wrote:

If every depositor attempted to withdraw all their money at the same time they would probably find there is a shortfall.

You were asked for proof.
"It is pretty obvious" is not proof. In fact, "It is pretty obvious" is imo an admission that you have no proof.
So, which depositor is missing money from their account? Can you show proof that the money is taken from a depositor's account and then lent out to a borrower?
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Old 29-04-2012, 08:53 PM   #58
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Why do you think B will have no way to be paid? Can he not sell the house to someone else?
First, you haven't specified that the loan involves any security interest over the property involved, also see below on the value of collateral match the amount of the debt.

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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.
I think this shows that you don't understand what a bank account actually is. A bank account is not: you pay money into the bank, which bundles it up and keeps it in a vault somewhere until you need it. A bank account is: You pay money into the bank; they promise to pay you back the money when you ask for it. In the meantime they invest your money (i.e. the lend it to other people). As Rumple pointed out, if everyone demands their money from a bank at the same time, the bank runs out of money because they have lent a lot of their depositors money out and haven't got it back yet. If bank accounts worked the way you seem to think then bank runs would not happen. They observably do.

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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.
Entitlement to a thing is also a kind of thing. On the logic that money is not property, then is stealing money from someone else not theft? Money is property. Your desert Island example just demonstrates that the value of property varies depending on your circumstances. If you were stuck on a desert Island with a bar of gold or a desktop computer, they would still be your property. They just wouldn't do you any good.

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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.
You appear to have the same thing causing inflation and deflation at the same time. I think that this also goes back to your idea of money being loaned into existence, which you still have not evidenced.

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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.
Who is "we" in this context? What will compel people to use your infrastructure instead of the existing one?
Quote:
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.
So, the infrastructure you are proposing is essentially just a way to trade individual promises to pay, amongst individuals instead of (as now happens) amongst banks and corporations, through credit derivatives etc?

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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...
So, let's go back to A and B again. B wants 100,000 GBP to build A's house. A says "I promise to pay you 100,000 GBP". At what point does B get 1000 one-hundred pound notes? A is promising to pay on the expectation that he is going to get paid for what ever work he does, so, when he does get paid, who does that money go to? Alternatively, are you saying that the trading of promises to pay will replace money as a medium of exchange.
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We make it obligatory. The the payments must be paid back to the CMI that retires the money out of circulation.
So you are proposing a state controlled system of banking?
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Why can't we insure the house?
Who pays for the insurance? Who requires there to be insurance? Who underwrites the insurance? If you consider the insurance as part of the cost of the loan (which you should if it is a mandatory part of taking the loan) then the loan is no longer 1:1 debt to repayment is it? there's the cost of the insurance too.
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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.
I'm not sure people generally want the government dictating the terms on which they can take loans. You're effectively saying the people can only borrow money if they have sufficient collateral and insurance to negate the risk of their default. In reality this would mean that only large loans, either secured on existing valuable assets or large loans to purchase assets together with a large down payment would be permissible.

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Take some time to really understand MPE and you will see how it is the only solution to the problem.
So far I haven't found the answers particularly convincing. Since you seem to be here as an advocate of MPE, this is your opportunity to convince people that MPE is "the only solution". So far you haven't convinced this one.
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Old 29-04-2012, 09:01 PM   #59
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Originally Posted by hadabusa View Post
money as debt, if thats no good, then whats the solution?

outlaw interest?

abolishing money altogether?
Like all the really difficult problems in the world, I don't think that there is one huge, brilliant solution out there, waiting to be discovered. Trying to prohibit interest isn't really a solution: history shows how that went, in medieval Europe and more recently in the middle east. Abolishing money is also impractical in a complex modern society - we need a medium of exchange, hence the money.

It might be more helpful to define exactly what it is we think if the problem: the banking crisis? loans at extortionate interest? the disparity between rich and poor? Certainly those are problems which exist, but they can't necessarily be solved all in the same way. There are plenty of things you can do, for example, to prevent lenders from preying on poor people - cap interest rates and fees, or even require fixed interest rates and prohibit default charges altogether. Of course, these measures run the risk of stamping out lending to the poor altogether, which in turn tends to drive them into the arms of loan-sharks who have no problem with breaking the law.

I tend to think, however, that the problem is fundamentally a human, one of greed and stupidity. There's not a lot the law can do about human nature, or even most aspects of culture.
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Old 29-04-2012, 09:11 PM   #60
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Originally Posted by mpe_solution View Post
So, which depositor is missing money from their account? Can you show proof that the money is taken from a depositor's account and then lent out to a borrower?
Well, if you are suggesting that loans can be made without the existence of depositors that raises an interesting question: why would a bank go to great lengths to attract depositors and offer those depositors a profit on their money when all the bank would do with those funds is to sit on them? If the bank can create money merely with a signature, it does not require depositors. In fact, the depositors would create a loss for the bank.

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