The Political Measuring Stick

Jason · Post by **Jason** » January 8th, 2011, 8:13 am

The Political Measuring Stick

How do we chart political progress? Are we more free today than yesterday? Are we wealthier than yesterday? Do we measure our politicians against a fixed position? Or do we sway back and forth with the whims and passions of the moment…Reagan, Bush Sr., Bill Clinton, Bush Jr., and now Obama says he’s going to bring about change and since we don’t like our current position we’ll vote for him? Now that we’ve gone a ways with Obama and he doesn’t appear to be delivering or at least he’s not delivering what we think he ought to….who will we go with next – Sarah Palin? Hillary Clinton? Mitt Romney? Rahm Emanuel? Ron Paul? Go with the elephant or the donkey? Maybe we go with the green party or the light party or the libertarians?

What about the issues? Is it gay/lesbian rights? Abortion? Environment? War – Afghanistan & Iraq or the other possibilities of Iran, N.Korea, Pakistan, China, Russia, Venezuela, Mexico? Terrorism – the “database” otherwise known as Al Qaeda? Drugs – lot of success we’ve had with that one? Gun control? National Debt - the rapidly approaching debt ceiling? Safety nets like welfare & social security? Healthcare? State rights? Immigration? Globalization? Manufacturing and China’s pesky fixed exchange currency ratio that undermines our manufacturing base – i.e. steals production jobs?

How do we measure progress on these issues and what’s the most important? Or is it as simple as having a roof overhead, 3 good meals a day, and an opportunity to work today for a better tomorrow? Where is our economic system today?

BACKGROUND:

Currently our monetary system is designed to transfer the ownership of all assets to the banks over time.

This is done by creating money via debt. Want to buy a house…simple, just sign on the dotted line. The mechanics of that transaction involve the bank drawing up an IOU for the debtor to sign. The bank creates the money against the IOU, which then becomes an asset for the bank, and the debtor happily hands over the money to a home builder or prior owner. That money has now entered the money supply and is free to circulate. There are constraints within which the bank must operate, controlled by the Federal Reserve, which is the ultimate creator/lender of debt, but that is basically how the money creation mechanism in our monetary system functions. Pretty much just 1’s and 0’s in the computer.

What about the terms of the deal? The debtor must either pay back the original loan amount to the bank – plus interest – or default and turn over the home to the bank – i.e. foreclosure. So the bank in return for being the loan facilitator or money creation instrument gets the original money back (which they didn’t have before) PLUS interest or the home. Sounds like a win/win for the bank doesn’t it? What did it cost them?

Where does the debtor (new home owner) get the interest? If I purchased a $500k home today at 5% interest I have to pay back roughly $1.2 million dollars. Where do I come up with the extra $700,000? Did the banks slip $700k out the back door that I can sneak around and grab in order to make good on the IOU?

This is the fundamental flaw (or genius design) of our monetary system. The only saving grace is time. The way I can make good on my IOUs is that I have 30 years for you and everyone else to come along day after day, year after year, and borrow thousands to inject into the money supply. I get a little bit of your money to add to my money that is circulating and I am able to pay the principle and interest payment on my IOU. There are some hiccups - like more money circulating for relatively the same amount of goods which causes a little bit of inflation…but for the most part the system works. Of course economists rant about it and people complain because the IRS takes a fixed percentage off the top….and since the top is growing they are in reality taking a larger and larger chunk every year…but the system functions fairly well and the majority of the people feel like they are prospering as their home values rise. Life is good as long as new debt is constantly being created. The pyramid is dependent upon a growing debt base….in other words the debt must go higher and higher if we are going to keep our assets and not default on payments.

Question of the day is – Can it go on forever? Unfortunately, the mathematical answer is NO.

Picture yourself entering a casino in Vegas. You obtain chips (Federal Reserve Notes or FRNs) from the casino based upon a pledge of collateral (assets or future labor) in the form of an IOU - either collateralized (assets) or personal signature (future labor). The house sets the rules and you can't play without their chips (FRNs). In this economic game, at the end of the day, you must return more chips (principle + interest payments + taxes) than chips that enter the game (debt). The house is mathematically guaranteed to get a percentage - they don't light the city because of winners (take it up with the IRS). Thus the only way you can win is for someone else to lose (hence the evil nature of gambling) - either now or at any future point in the game. Therefore, in order for everyone to enjoy the game or exit in one piece with ownership of your assets, it becomes a ponzi scheme - new money (debt via new borrowers) must constantly enter the game in greater and greater quantities in order for the old money to walk away whole (break even after interest & taxes or better yet make a profit).

Like all ponzi schemes (Social Security anyone?) there is an end point where you can't find any new suckers (people have figured out the game and are unwilling to play or you reach the debt saturation point where there is no more assets to pledge for chips and future labor has been sold off into the foreseeable future due to lack of new players - declining populations (Japan) or already born indebted (most of the world). The gaming franchise now has complete ownership and the players are slaves since all the players are maxed out (owe more chips than what is currently in circulation). This is also a mathematical certainty.

At some point in the future a point is reached where one can barely service the debt they have let alone taking on additional debt. When everyone reaches that position….called debt saturation…its game over. The fundamental flaw (or genius design) is that the debt must grow larger and larger every year in order to keep the system functioning. The longer we go the higher the increases in debt must be. Otherwise there is not enough money to go around and demand for everything drops. Jobs are cut, wages cut, home prices drop, and the defaults (transfer of ownership) start ramping up. We hit that point in the mid-90’s and Greenspan created the Sweeps program which swept demand deposits into a savings account to be loaned out. Demand deposits are basically checking accounts. You write a demand (check) against your deposit (checking account) and the money is supposed to be there to make good or you get hit with fees, fines, and ultimately the possibility of prison. Well the genius Greenspan decided that all that money sitting around in checking accounts (average account balances) would better serve the economy by being swept into a savings account and loaned out. So as long as you keep your average checking account balance above a certain amount (typically $1000-1500) the banks are making money off your money and won’t charge you a fee for having a checking account.

The Sweeps program ramped up to add several hundred billion a year in liquidity to our monetary system. This wasn’t the only tool in the toolbox and other things were used like ramping up credit cards. A few years went by and we started to plateau in debt accumulation so Greenspan then brilliantly lowered the cost of debt (interest rate) thus raising the debt saturation limit. If the interest component of your home loan drops….your house payment drops and you can afford more house….or at least a higher initial home value. Going back to our earlier analogy…the $700k in interest on that home loan shrinks to $400k and the house can now sell for $800k instead of $500k maintaining my $1.2 million debt service limit. Greenspan even went so far as to lower the cost of debt (interest rates) below the rate of inflation so that a person would be absolutely stupid not to take all that cheap money and bury themselves head over heels in debt. A brilliant play on his part - insert debt gavage and stuff us until we are ready to pop…all voluntarily by the way.

States and local municipalities have also been kicking the can down the road via bonds. They never pay off a bond but borrow new money to pay off the old money….plus a little extra. This also extends to governments and corporations around the world. In the past decade we have seen a dramatic shrinking effect in average maturity dates (average time to pay the debt off). This is best depicted in the following excerpt from an article posted on Zero Hedge a year ago:

The U.S. Lunatic Asylum (i.e., Economy) Is Facing Approximately $15 Trillion In Roll Risk By 2012

Zero Hedge recently highlighted the developing risk in the government's outstanding Treasury portfolio, where nearly 40% of all issues mature within the year. As such the roll risk for the US government is massive, and even the smallest unexpected macro blip would make the rolling/refinancing of roughly $5 trillion in debt very problematic. Yet the US government is not alone in this quandary of how to keep T-Bill interest rates at record lows: an earlier report by Moody's demonstrates that the banking system is in far, far worse shape: "we note that average maturities of new debt issuances rated by Moody’s – which we use as an indicator of general trends -- fell from 7.2 years to 4.7 years globally over the last five years. This is the shortest average maturity for new debt at any given point during the 30 years of bank funding history covered by our analysis. As a related matter, we estimate that banks that we rate will face maturing debt of about $10 trillion between now and the end of 2015, $7 trillion of which will occur by the end of 2012."

Let's do the math: the US Gov't needs to roll about $3 trillion (and increasing) every year, Commercial Real Estate has a $3 trillion refi cliff around 2014 and the banking system has a $7 trillion roll maturity by 2012. In other words at or about 2012, or at the time Barack Obama is sure to be enjoying record approval ratings (high or low, your choice) courtesy of 30% unemployment, the American economy will be straddled with not just the ongoing burden of issuing about $2 trillion in debt each year to finance what can only be characterized as a budget concocted by the most hard-core, raving lunatics in the Federal Insane Asylum Reserve, but will have to deal with roughly $15 trillion of rolling maturities.

Full Moody's report for those who would rather see that the US economy is going to 10th circle of hell promptly, instead of buying Amazon stock at 1E10^18243 P/E, attached below.
http://www.zerohedge.com/article/us-lun ... -risk-2012

Then in 2008 after a number of years of glorious debt ramp up we hit the debt saturation point again. It has taken nearly 100 years since that secret meeting on Jekyll Island but the end game has finally arrived. At a couple points in 2008 it seemed that the financial system would collapse (bank balance sheets) but the private banking cartel through their corporation, the Federal Reserve, transferred bad assets at market value to the Federal Reserve’s balance sheet….basically a shell game that put the burden upon the American taxpayer….a win/win situation for the banks. They have printed more money but a good portion has gone into the future’s markets to keep the price of commodities high while demand for those commodities drops. Basically keeping the sheeple believing that inflation will continue to be the theme versus deflation.

Also the Federal government (real Fed) has been loaning lots of money to the states for things like Medicaid and Unemployment to keep the politicians plump and happy….and support the bottom to enhance reliance on the Federal Government (buy votes and supporters who otherwise might riot and bring the system down since they don’t have anything left to lose). Why? Well at this stage of the game – end point – the focus changes from enticing people further into debt (mathematically, despite exotic shadow banking derivatives, no longer a possibility) to conducting an orderly transfer of assets to the banks. Go too fast and the frog will jump out of the pot before the water boils. People have a tendency to get violent and angry when they realize they no longer own anything and have become serfs…especially after enjoying a couple hundred years of freedom and prosperity that the rest of the world has never known.

The roll up strategy is currently being implemented in multiple arenas – banking (big banks eat all the little banks - who are dying, a couple at a time, every week), federal power (states were enticed into debt and now via federal handouts are giving up sovereignty and power by the week), banking law enforcement (the alphabet soup – DHS, NSA, TSA, FEMA, CIA, FBI, IRS, DIA, ATF, NORTHCOM, etc…are getting more power by the week). War is basically an amplified crisis (everything on a need to know basis) and thus is an extremely powerful mechanism for gaining control…especially a War on Terror that never ends, has no real identifiable enemy, and can create whatever enemies the bank controlled state desires.

Also, the final FYI, the banks are global so their interests are not confined to our little nation…and the rest of the world is also quickly falling into their hands. Europe is a little ahead of us in the austerity ratchet down….but we aren’t far behind. In terms of our near future I see (for whatever its worth) another 20-30% drop in house prices over the next 6 to 12 months. I see rising interest rates on all credit products. I see massive defaults/bankruptcies (transfer of ownership). I see rising energy/food (tied together at the hip) costs. I see people struggling to pay back debt with dollars that are harder and harder to come by. I see the next wave in job losses hitting mid-summer 2011 due to the contraction of state and local governments as a result of budget cuts. I see serious battles breaking out between cities, counties, and states over funding. I see tremendous difficulties around the world in rolling over trillions (in now short term) debt that is coming due this year. The distance the politicians, the liaisons who don’t want to break the good news to us, can continue to kick the can down the road is getting less and less as banks (ultimately owned by a few global private investors) put the squeeze on maturity dates.

MEASURING STICK:

Now that we have the background in place…What’s the most important political issue today? If we resolve our economic problems doesn’t that buy us time, at our leisure, to try and resolve the rest of our issues with the security that we’ll have a roof over our heads, 3 good meals a day, and the opportunity to work today for a better tomorrow? Or as the founding fathers more wisely put – Life, Liberty, and the pursuit of Happiness (property)? If that is the most important measuring stick and the one we can all unite on…which side of the fence do our politicians fall on? Do they work for the banks or do they work for the people? How do we know?

“If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children wake up homeless on the continent their Fathers conquered...I believe that banking institutions are more dangerous to our liberties than standing armies... The issuing power should be taken from the banks and restored to the people, to whom it properly belongs." - Thomas Jefferson

Posted with a few links for additional information and The American Dream video here -
http://yophat.blogspot.com/2011/01/poli ... stick.html

Original_Intent · Post by **Original_Intent** » January 8th, 2011, 8:52 am

Very nice article, Mummy!

Jason · Post by **Jason** » January 8th, 2011, 8:57 am

Original_Intent wrote:Very nice article, Mummy!

Thank you....its rough...but I woke up early this morning thinking about the economic conference next month and thinking about what I would say if I had a couple of minutes...and this is pretty much an expanded version of that.

Also posted at the blog -
http://yophat.blogspot.com/

AngelPalmoni · Post by **AngelPalmoni** » January 8th, 2011, 9:34 am

Awesome I never understood this at all, Thank you I will be sharing this with many more People... sad that I'm working at a Bank today while reading this lol... Good thing I have no MTG appointments today hahaha.

Jason · Post by **Jason** » January 8th, 2011, 12:20 pm

AngelPalmoni wrote:Awesome I never understood this at all, Thank you I will be sharing this with many more People... sad that I'm working at a Bank today while reading this lol... Good thing I have no MTG appointments today hahaha.

Thank you! Made some edits in an effort to fine tune it a little more. Basically a consolidation of many of my rants on here.

Squally · Post by **Squally** » January 8th, 2011, 9:03 pm

Enjoyed the article. Puts things in perspective to where we are headed when the bankers are the priority and the people are last.

Jason · Post by **Jason** » January 9th, 2011, 8:56 pm

Squally wrote:Enjoyed the article. Puts things in perspective to where we are headed when the bankers are the priority and the people are last.

Thank you! Yeppers...I think we are headed into the final wind up. Should be an interesting year!!!

davedan · Post by **davedan** » January 9th, 2011, 10:53 pm

Many politicians agree that the FED needs to go. Many just don't know what to replace it with.

Yes, instead of FED-controlled, fractional reserve, debt-based fiat currency, we need a more equitable system.

1. Let the US Treasury create all money and not just a fraction
2. Allow local banks to determine credit-worthiness of local borrowers, and allow these local banks to lend full-reserve, fee-based, no-interest loans to individuals and groups for non-depreciating assets such as land, and real-estate.
3. This money that is created by the US Treasury doesnt need to be backed by gold because it will be backed by the land, and/or real-estate it is being used to purchase.
4. The borrower pays a loan origination fee, and monthly service fee to cover banking overhead and to generate federal revenue as a voluntary tax.
5. Borrowers build equity from the first payments. If they should miss a payment, that payment is deducted from their equity. Thus the loan becomes a reverse mortgage at any time. Default doesn't occur until the borrower has lost all equity.
6. While other venture capital and traditional banks will be needed, these "safety societies" will be protected from inflation, protected from people who borrow money to speculate on the stock market and all other causes of banking failures since this country began.

Jason · Post by **Jason** » January 10th, 2011, 12:22 pm

davedan wrote:Many politicians agree that the FED needs to go. Many just don't know what to replace it with.

Yes, instead of FED-controlled, fractional reserve, debt-based fiat currency, we need a more equitable system.

1. Let the US Treasury create all money and not just a fraction
2. Allow local banks to determine credit-worthiness of local borrowers, and allow these local banks to lend full-reserve, fee-based, no-interest loans to individuals and groups for non-depreciating assets such as land, and real-estate.
3. This money that is created by the US Treasury doesnt need to be backed by gold because it will be backed by the land, and/or real-estate it is being used to purchase.
4. The borrower pays a loan origination fee, and monthly service fee to cover banking overhead and to generate federal revenue as a voluntary tax.
5. Borrowers build equity from the first payments. If they should miss a payment, that payment is deducted from their equity. Thus the loan becomes a reverse mortgage at any time. Default doesn't occur until the borrower has lost all equity.
6. While other venture capital and traditional banks will be needed, these "safety societies" will be protected from inflation, protected from people who borrow money to speculate on the stock market and all other causes of banking failures since this country began.

They give lip service to the idea....but even Ron Paul shuts his mouth when they back him into a corner. The Federal Reserve is just a quasi corporate front for the big banks which are corporate fronts for a few private shareholders. They've been gaining more and more power for nearly a 100 years through the Federal Reserve....they won't hand it over without a fight. I haven't seen any politician that's really willing to take the fight to them. Even Ron Paul is limited to begging for a look inside the doors (an audit) - let alone the idea of actually kicking them to the curb....I bet a nickel to a dollar the audit will never happen!

creator · Post by **creator** » January 13th, 2011, 5:04 pm

Mummy wrote:Where does the debtor (new home owner) get the interest? If I purchased a $500k home today at 5% interest I have to pay back roughly $1.2 million dollars. Where do I come up with the extra $700,000? Did the banks slip $700k out the back door that I can sneak around and grab in order to make good on the IOU?

This is the fundamental flaw (or genius design) of our monetary system. The only saving grace is time. The way I can make good on my IOUs is that I have 30 years for you and everyone else to come along day after day, year after year, and borrow thousands to inject into the money supply. I get a little bit of your money to add to my money that is circulating and I am able to pay the principle and interest payment on my IOU. There are some hiccups - like more money circulating for relatively the same amount of goods which causes a little bit of inflation…but for the most part the system works. Of course economists rant about it and people complain because the IRS takes a fixed percentage off the top….and since the top is growing they are in reality taking a larger and larger chunk every year…but the system functions fairly well and the majority of the people feel like they are prospering as their home values rise. Life is good as long as new debt is constantly being created. The pyramid is dependent upon a growing debt base….in other words the debt must go higher and higher if we are going to keep our assets and not default on payments.

Question of the day is – Can it go on forever? Unfortunately, the mathematical answer is NO.

Perhaps you can educate me on some aspects of this. I've heard most, if not all of this before and I believe I understand it except I'm still trying to wrap my mind around some aspects of it...

What you described in the portion I quoted. It seems the only other way is a gold/silver backed currency? And any fiat currency has this "flaw" you speak of, and it's not necessarily even cause by bank loans and interest, debt, etc...

The "flaw" has to do with the zero point, or where the money originates from... If the currency is backed by gold/silver... all that gold/silver came from somewhere and represents a significant amount of labor, which some say is equivalent to the market value of the gold/silver which makes it a good resource as to have a currency based on.

It seems that all the worlds debts and interest could be paid off completely, unlike what you describe... let's say there are ten of us in the world... and 1 is the banker... we each have 100,000 loans plus 100,000 in interest... we could conclude that the banker has created 1,000,000 out of thin air and we, combined, are expected to pay back 2,000,000 (even though only 1,000,000 is in circulation)... well, so long as we continue to exchange services with each other we can also pay off our debt... paying the debt to the banker doesn't necessarily take that money out of circulation... the banker also needs his food, shelter and other services, it would seem eventually the money would circulate back through and there would not be a problem paying off our loans.

Help me understand if I am wrong... but... it seems that maybe people are over-complicating the picture? and the only real equation to be solved by a society is the starting point for the currency... let's start with no currency, but we each have goods/service we've been trading... now let's introduce a currency... one option is to decide we want it all backed by gold/silver... ok, so now we trade our goods/services for gold silver, as a medium of exchange between the goods/services... then we decide we want a paper currency backed by gold/silver... now we just need a place to deposit that gold/silver which we can then exchange for the paper currency...

let's take it further... we decide we want a fiat paper currency (no backing)... it seems the main problem here is who to trust? Let's say we find an honest person and he is in charge of the paper currency. where do we start? Our new 'bankman' prints $1,000,000... but now what? what's the beginning point? how do you get the money into the economy? The easy answer, the way things work today, is probably DEBT... money is debt... hmmm, people will now get loans from the bank and the money is now in circulation...

well, let's take a step back...

What if we refuse to go into debt? How do you get the money into circulation?

I'm thinking back to my involvement with bartering now... perhaps it would work the way a bartering company works. (and requires honesty, transparency)... hmmm, but it still involves debt... Person A does mechanics work for person B, and in exchange the barter company awards him 100 credits... which puts person B at -100 credits (debt) until person B provides a service to someone else...

WOW, I think as I'm thinking this through and typing it out I am realizing that money really is debt!!!

Is there no other way? besides direct one on one bartering/trading to avoid a debt based currency? It seems that even a gold/silver backed currency is still based on debt? unless... It seems for the gold/silver backed currency there would have to be one central place to act not only as a bank but also a place to store and sell what you are trading them in exchange for the currency.

so it's come down to either debt-based, commodity-based or a mix?

I look forward to your thoughts. (if you don't read my whole post you're going to misinterpret me or misquote me for sure

)

Jason · Post by **Jason** » January 13th, 2011, 9:35 pm

they key or flaw or genius design is interest. The money for interest is never created. In your scenario everyone in the group cannot pay back the banker because they must pay interest and that money was never injected into the system....THEREFORE somebody in the group or multiple individuals will default and the bank will get their property.....at nearly zero cost.

the only way the system can survive (for a time) is continued growth in debt in order to pay interest.....but there is a mathematical end point called debt saturation. In an economy with an expanding population (growing base of new debtors) the economy will last longer....hence the "greatest generation - post WWII) put the US ahead of Japan and Europe by having more babies. Unfortunately the Boomers, Generation X & Y haven't kept pace and have dropped the ball due to wickedness and the corresponding social astigmatism.

There are myriad ways to get money into the economy....as has been demonstrated by various economies throughout the world's history. The most popular in terms of strength would be government "coining" of currency based upon a foundation of pm's such as gold and silver.

creator · Post by **creator** » January 13th, 2011, 10:06 pm

Mummy wrote: In your scenario everyone in the group cannot pay back the banker because they must pay interest and that money was never injected into the system....THEREFORE somebody in the group or multiple individuals will default and the bank will get their property.....at nearly zero cost.

I'm not so sure about that...

in my scenario 1,000,000 was put into the system, and 2,000,000 will be the total repayment because of interest... considering that the 1,000,000 is going to continue to circulate, that 1,000,000 eventually ends up trading hands 100 times! ($100,000,000), eventually all the debt and interest could be paid off.

Is there a flaw in that scenario?... as long as people don't just hold onto their money, and as long as they remain product it will continue to circulate... I'm thinking that what you might be saying is once any of that money goes back to the bank is out of the system for good? and eventually all the money goes out of the system for good if it's used to pay the bank back because the physical supply is still just 1,000,000 even though through circulation it can be used for billions worth of product and services...

but the bank has their bills and expenses and employees and so on .... wait scratch that... if the bank isn't making new loans it's not going to be much of a business very minimal expenses... however, mr Joe Banker with his 1,000,000 in interest, as it came in, has been spending it, and that money now circulates into the economy... once all the loads are paid off Joe Banker closes the bank and starts an ice cream parlor... and now everyone is debt free and the original 1,000,000 is still circulating.

problem solved?

Jason · Post by **Jason** » January 13th, 2011, 10:54 pm

so you are saying that every time the money trades hands it multiplies by 10??? If that were true we really would have hyperinflation!

There is something to be said of the velocity of money....which California used to be the highest on the list as a prior Californian engineer (and my replacement in the bishopric - currently bishop of that ward) liked to remind me when I talked about the economic debt bubble with him in 2007. He claimed that California was fine because the velocity of money was so high. So much for that eh?

let's go back to your scenario - 10 people and 1 is the banker. 9 people borrow $1 million at straight 10% interest with 10 year repayment plan from the banker who didn't have any money. The money supply has now expanded by $9 million causing inflation so the cost of everything increases 10%....or in other words the money is now worth less. The annual debt payment (principle + interest) is $1,464,708.60 with total payments back to the bank of $14,647,086. No new debt is created. The money circulates and you guys all do business with each other. Now if everything is equal you will be ok until year 7 rolls around. If not then some of the 9 will have problems earlier. Anyways, saying its been equal, year 7 rolls around the 1 banker now has $9 million in his pocket yet the other 9 debtors still owe him $5,647,086......so all 9 default on their loans and the 1 banker seizes their property. Now the banker has $9 million and the property. What did it cost him for the $9 million and the property?

The labor to write up 9 IOUs and an entry into the computer creating an asset for the bank (the IOUs) and a liability for the debtor.

Pretty neat system eh? Of course it would happen prior to the 7 year mark due to taxes...also it would happen one by one to those who weren't as business savvy and cutthroat.....so it would be blamed on poor business practices rather than the banker.

creator · Post by **creator** » January 13th, 2011, 11:25 pm

Mummy wrote:so you are saying that every time the money trades hands it multiplies by 10??? If that were true we really would have hyperinflation!

If you re-read what I wrote, carefully, you'll see that I never said the money multiplies, the money simply trades hands many many times... meaning that one physical dollar, while it doesn't multiply, it could be used 1 million times...

you've got to now rework the scenario because there is no inflation either.

Jason · Post by **Jason** » January 14th, 2011, 10:13 am

BrianM wrote:
Mummy wrote:so you are saying that every time the money trades hands it multiplies by 10??? If that were true we really would have hyperinflation!
If you re-read what I wrote, carefully, you'll see that I never said the money multiplies, the money simply trades hands many many times... meaning that one physical dollar, while it doesn't multiply, it could be used 1 million times...

you've got to now rework the scenario because there is no inflation either.

...take out the inflation.....you still have to pay back more money than was created....which inherently and ironically is deflationary!

What part of the scenario doesn't work?

BrianM wrote:in my scenario 1,000,000 was put into the system, and 2,000,000 will be the total repayment because of interest... considering that the 1,000,000 is going to continue to circulate, that 1,000,000 eventually ends up trading hands 100 times! ($100,000,000), eventually all the debt and interest could be paid off.

I read it and reread it.....and it still appears (to me) that you are saying $1,000,000 somehow multiplies into $100,000,000 due to the velocity of money (how fast money changes hands).

Anyways, using your scenario above....where does the extra million come from to pay the interest?

Jason · Post by **Jason** » January 16th, 2011, 6:39 pm

The LDS version -

The Political Measuring Stick

How do we prioritize and measure political goals and progress? Are we more free today than yesterday? Are we wealthier and more prosperous than yesterday? Do we reap the fruit of our labors?

Are our representatives (politicians) engaged in good causes? Do we measure our politicians against a fixed position or against fundamental principles? Or do we sway back and forth with the whims and passions of the moment…Reagan, Bush Sr., Bill Clinton, Bush Jr., and now Obama says he’s going to bring about change and since we don’t like our current position we’ll vote for him? Now that we’ve gone a ways with Obama and he doesn’t appear to be delivering or at least he’s not delivering what we think he ought to….who will we go with next – Sarah Palin? Hillary Clinton? Mitt Romney? Rahm Emanuel? Ron Paul? Do we go with the party - elephant or the donkey? Maybe we go with the Green party or the Light party or the Libertarians?

What about the issues? Is it gay/lesbian rights? Abortion? Environment? Wars – Afghanistan & Iraq? Rumors of wars - Iran, N.Korea, Pakistan, China, Russia, Venezuela, and/or Mexico? War on Terrorism – the “database” otherwise known as Al Qaeda? War on Drugs – lot of success we’ve had with that one? Gun control? National Debt - the rapidly approaching debt ceiling? Safety nets like unemployment, welfare & social security? Healthcare? State rights? Immigration? Globalization? Manufacturing and China’s pesky fixed exchange currency ratio that undermines our manufacturing base – i.e. steals production jobs?

How do we prioritize what’s most important and then measure progress on these issues? Or is it as simple as having a roof overhead, 3 good meals a day, and an opportunity to work today for a better tomorrow? Where is our economic system today? Does it make us prosperous and united as a people or does it degrade, divide, and devour? Do we enjoy more economic freedom today than our forefathers of yesterday? How do we even define economic freedom? Or liberty in general?

Marion G. Romney in his talk “The Perfect Law of Liberty” stated:

The meaning of the word liberty is difficult to circumscribe.

The sweets of liberty about which we usually speak may be classified as (1) political independence, (2) economic freedom, and (3) free agency.

The three are inseparably connected. The Baron Nathan Mayer Rothschild is reported to have said:

"I care not what puppet is placed on the throne of England to rule the Empire...The man that controls Britain's money supply controls the British Empire. And I control the money supply."

In order to enjoy political independence one must also enjoy economic freedom. While we enjoy free agency no matter what condition we may find ourselves in…the constraints in which we find ourselves may severely limit the use of that free agency to enjoy political independence and economic freedom. Often times it is through the use of our free agency that we severely constrain our political independence and economic freedom. Brother Romney in his talk used the biblical example of the Egyptians:

We have a classic example of the loss of economic freedom by the misuse of free agency in the book of Genesis. The Egyptians, instead of exercising their agency to provide for themselves against a day of need, depended upon the government. As a result, when the famine came they were forced to purchase food from the government. First they used their money. When that was gone, they gave their livestock, then their lands; and finally they were compelled to sell themselves into slavery, that they might eat. (See Gen. 41:54–56; Gen. 47:13–26.)

The choices that we make as a collective people, utilizing our individual free agency, either lead us towards liberty or away from liberty depending upon the principles employed. The foundation is solid and the founding fathers paid a price in blood that has enabled multiple generations to enjoy political independence and economic freedom. Where are we today?

President Harold B. Lee said,

“Today we are being tested and tried by another kind of test that I might call the ‘test of gold’—the test of plenty, affluence, ease—more than perhaps the youth of any generation have passed through, at least in this Church.” (Sweet Are the Uses of Adversity … , Brigham Young University Speeches of the Year, Provo, 7 Feb. 1962, p. 3.)

President Brigham Young stated,

“The worst fear I have about this people is that they will get rich in this country, forget God and His people, wax fat, and kick themselves out of the Church and go to hell. This people will stand mobbing, robbing, poverty, and all manner of persecution, and be true. But my greater fear … is that they cannot stand wealth.” (James S. Brown, Life of a Pioneer, Salt Lake City: Geo. Q. Cannon and Sons Co., 1900, pp. 122–23.)

Brother Dean L. Larsen put it in this manner,

“The coveting of wealth so often has resulted in avarice, dishonesty, and greed. The acquisition of wealth has frequently produced pride, self-satisfaction, and arrogance.

History repeatedly confirms that the abundance of earthly possessions can be both a blessing and a curse, depending upon the way these things are viewed and used. When we consume them on our own lust, we invoke tragedy.” (“Beware Lest Thou Forget the Lord”, April 1991 General Conference address.)

Elder M. Russell Ballard stated,

“We are living in a period of great prosperity that may, when history is written, prove to be as devastating to our souls as the effects of physical persecutions were upon the bodies of our pioneer ancestors.” (“The Law of Sacrifice”, Liahona, Mar. 2002, p. 10.)

BACKGROUND:

Currently our monetary system is designed to transfer the ownership of all assets to the banks over time.

This is done by creating money via debt. Want to buy a house…simple, just sign on the dotted line. The mechanics of that transaction involve the bank drawing up an IOU for the debtor to sign. The bank creates the money against the IOU, which then becomes an asset for the bank, and the debtor happily hands over the money to a home builder or prior owner. That money has now entered the money supply and is free to circulate. There are constraints within which the bank must operate, controlled by the Federal Reserve, which is the ultimate creator/lender of debt, but that is basically how the money creation mechanism in our monetary system functions. Pretty much just 1’s and 0’s in the computer.

What about the terms of the deal? The debtor must either pay back the original loan amount to the bank – plus interest – or default and turn over the home to the bank – i.e. foreclosure. So the bank in return for being the loan facilitator or money creation instrument gets the original money back (which they didn’t have before) PLUS interest or the home. Sounds like a win/win for the bank doesn’t it? What did it cost them?

Where does the debtor (new home owner) get the interest? If I purchased a $500k home today at 5% interest I have to pay back roughly $1.2 million dollars. Where do I come up with the extra $700,000? Did the banks slip $700k out the back door that I can sneak around and grab in order to make good on the IOU?

This is the fundamental flaw (or genius design) of our monetary system. The only saving grace is time. The way I can make good on my IOU for the home purchase is that I have 30 years for you and everyone else to come along day after day, year after year, and borrow thousands to inject into the money supply. I get a little bit of your money to add to my money that is circulating and I am able to pay the principle and interest payment on my IOU. There are some hiccups - like more money circulating for relatively the same amount of goods which causes a little bit of inflation…but for the most part the system works. Of course economists rant about it and people complain because the IRS takes a fixed percentage off the top….and since the top is growing they are in reality taking a larger and larger chunk every year…but the system functions fairly well and the majority of the people feel like they are prospering as their home values rise. Life is good as long as new debt is constantly being created…but the pyramid is dependent upon a growing debt base. In other words, the debt must go higher and higher if we are going to keep our assets and not default on payments.

Question of the day is – Can it go on forever? Unfortunately, the mathematical answer is NO.

At some point in the future a point is reached where one can barely service the debt they have let alone taking on additional debt. When everyone reaches that position….called debt saturation…it is game over. The fundamental flaw (or genius design) is that the debt must grow larger and larger every year in order to keep the system functioning. The longer we go the higher the increases in debt must be. Otherwise there is not enough money to go around and demand for everything drops. Jobs are cut, wages cut, home prices drop, and the defaults (transfer of ownership) start ramping up. We hit that point in the mid-90’s and Greenspan created the Sweeps program which swept demand deposits into a savings account to be loaned out. Demand deposits are basically checking accounts. You write a demand (check) against your deposit (checking account) and the money is supposed to be there to make good or you get hit with fees, fines, and ultimately the possibility of prison. Well the genius Greenspan decided that all that money sitting around in checking accounts (average account balances) would better serve the economy by being swept into a savings account and loaned out. So as long as you keep your average checking account balance above a certain amount (typically $1000-1500) the banks are making money off your money and won’t charge you a fee for having a checking account.

The Sweeps program ramped up to add several hundred billion a year in liquidity to our monetary system. This wasn’t the only tool in the toolbox and other things were used like ramping up credit cards. A few years went by and we started to plateau in debt accumulation so Greenspan then brilliantly lowered the cost of debt (interest rate) thus raising the debt saturation limit. If the interest component of your home loan drops….your house payment drops and you can afford more house….or at least a higher initial home value. Going back to our earlier analogy…the $700k in interest on that home loan shrinks to $400k and the house can now sell for $800k instead of $500k maintaining my $1.2 million debt service limit. Greenspan even went so far as to lower the cost of debt (interest rates) below the rate of inflation so that a person would be absolutely stupid not to take all that cheap money and bury themselves head over heels in debt. A brilliant play on his part - insert debt gavage and stuff us until we are ready to pop…all voluntarily (through use of our own free agency) by the way.

Picture yourself entering a casino in Vegas. You obtain chips (Federal Reserve Notes or FRNs) from the casino based upon a pledge of collateral (assets or future labor) in the form of an IOU - either collateralized (assets) or personal signature (future labor). The house sets the rules and you can't play without their chips (FRNs). In this economic game, at the end of the day, you must return more chips (principle + interest payments + taxes) than chips that enter the game (debt). The house is mathematically guaranteed to get a percentage - they don't light the city because of winners (take it up with the IRS). Thus the only way you can win is for someone else to lose (hence the evil nature of gambling) - either now or at any future point in the game. Therefore, in order for everyone to enjoy the game or exit in one piece with ownership of your assets, it becomes a ponzi scheme - new money (debt via new borrowers) must constantly enter the game in greater and greater quantities in order for the old money to walk away whole (break even after interest & taxes or better yet make a profit).

Like all ponzi schemes (Social Security anyone?) there is an end point where you can't find any new suckers (people have figured out the game and are unwilling to play or you reach the debt saturation point where there is no more assets to pledge for chips and all the future labor has been sold off into the foreseeable future (generations born indebted throughout most of the world). The gaming franchise now has complete ownership and the players are slaves since all the players are maxed out (owe more chips than what is currently in circulation). This is also a mathematical certainty.

Does it start to sound like Egypt yet? In the Priesthood session of the October 1998 conference President Gordon B. Hinckley related the following:

I wish to speak to you about temporal matters.

As a backdrop for what I wish to say, I read to you a few verses from the 41st chapter of Genesis.

Pharaoh, the ruler of Egypt, dreamed dreams which greatly troubled him. The wise men of his court could not give an interpretation. Joseph was then brought before him: “Pharaoh said unto Joseph, In my dream, behold, I stood upon the bank of the river:

“And, behold, there came up out of the river seven kine, fatfleshed and well favoured; and they fed in a meadow:

“And, behold, seven other kine came up after them, poor and very ill favoured and leanfleshed. …

“And the lean and the ill favoured kine did eat up the first seven fat kine: …

“And I saw in my dream … seven ears came up in one stalk, full and good:

“And, behold, seven ears, withered, thin, and blasted with the east wind, sprung up after them:

“And the thin ears devoured the seven good ears: …

“And Joseph said unto Pharaoh, … God hath shewed Pharaoh what he is about to do.

“The seven good kine are seven years; and the seven good ears are seven years: the dream is one. …

“… What God is about to do he sheweth unto Pharaoh.

“Behold, there come seven years of great plenty throughout all the land of Egypt:

“And there shall arise after them seven years of famine;

“… And God will shortly bring it to pass” (Gen. 41:17–20, 22–26, 28–30, 32).

Now, brethren, I want to make it very clear that I am not prophesying, that I am not predicting years of famine in the future. But I am suggesting that the time has come to get our houses in order.

So many of our people are living on the very edge of their incomes. In fact, some are living on borrowings.

We have witnessed in recent weeks wide and fearsome swings in the markets of the world. The economy is a fragile thing. A stumble in the economy in Jakarta or Moscow can immediately affect the entire world. It can eventually reach down to each of us as individuals. There is a portent of stormy weather ahead to which we had better give heed.

I hope with all my heart that we shall never slip into a depression. I am a child of the Great Depression of the thirties. I finished the university in 1932, when unemployment in this area exceeded 33 percent.

I repeat, I hope we will never again see such a depression. But I am troubled by the huge consumer installment debt which hangs over the people of the nation, including our own people. In March 1997 that debt totaled $1.2 trillion, which represented a 7 percent increase over the previous year.

In December of 1997, 55 to 60 million households in the United States carried credit card balances. These balances averaged more than $7,000 and cost $1,000 per year in interest and fees. Consumer debt as a percentage of disposable income rose from 16.3 percent in 1993 to 19.3 percent in 1996.

Everyone knows that every dollar borrowed carries with it the penalty of paying interest. When money cannot be repaid, then bankruptcy follows. There were 1,350,118 bankruptcies in the United States last year. This represented a 50 percent increase from 1992. In the second quarter of this year, nearly 362,000 persons filed for bankruptcy, a record number for a three-month period.

We are beguiled by seductive advertising. Television carries the enticing invitation to borrow up to 125 percent of the value of one’s home. But no mention is made of interest.

President J. Reuben Clark Jr., in the April 1938 general conference, said from this pulpit: “Once in debt, interest is your companion every minute of the day and night; you cannot shun it or slip away from it; you cannot dismiss it; it yields neither to entreaties, demands, or orders; and whenever you get in its way or cross its course or fail to meet its demands, it crushes you” (in Conference Report, Apr. 1938, 103).

Since the beginnings of the Church, the Lord has spoken on this matter of debt. To Martin Harris through revelation He said: “Pay the debt thou hast contracted with the printer. Release thyself from bondage” (D&C 19:35).

President Heber J. Grant spoke repeatedly on this matter from this pulpit. He said: “If there is any one thing that will bring peace and contentment into the human heart, and into the family, it is to live within our means. And if there is any one thing that is grinding and discouraging and disheartening, it is to have debts and obligations that one cannot meet” (Gospel Standards, comp. G. Homer Durham [1941], 111).

President Faust would not tell you this himself. Perhaps I can tell it, and he can take it out on me afterward. He had a mortgage on his home drawing 4 percent interest. Many people would have told him he was foolish to pay off that mortgage when it carried so low a rate of interest. But the first opportunity he had to acquire some means, he and his wife determined they would pay off their mortgage. He has been free of debt since that day. That’s why he wears a smile on his face, and that’s why he whistles while he works.

I urge you, brethren, to look to the condition of your finances. I urge you to be modest in your expenditures; discipline yourselves in your purchases to avoid debt to the extent possible. Pay off debt as quickly as you can, and free yourselves from bondage.

This is a part of the temporal gospel in which we believe. May the Lord bless you, my beloved brethren, to set your houses in order. If you have paid your debts, if you have a reserve, even though it be small, then should storms howl about your head, you will have shelter for your wives and children and peace in your hearts. That’s all I have to say about it, but I wish to say it with all the emphasis of which I am capable.

States and local municipalities have also been kicking the debt can down the road for decades via bonds. They never pay off a bond but borrow new money to pay off the old money….plus a little extra. This also extends to governments and corporations around the world. In the past decade we have seen a dramatic shrinking effect in average maturity dates (average time to pay the debt off). This is best depicted in the following excerpt from an article posted on Zero Hedge a year ago:

The U.S. Lunatic Asylum (i.e., Economy) Is Facing Approximately $15 Trillion In Roll Risk By 2012

Zero Hedge recently highlighted the developing risk in the government's outstanding Treasury portfolio, where nearly 40% of all issues mature within the year. As such the roll risk for the US government is massive, and even the smallest unexpected macro blip would make the rolling/refinancing of roughly $5 trillion in debt very problematic. Yet the US government is not alone in this quandary of how to keep T-Bill interest rates at record lows: an earlier report by Moody's demonstrates that the banking system is in far, far worse shape: "we note that average maturities of new debt issuances rated by Moody’s – which we use as an indicator of general trends -- fell from 7.2 years to 4.7 years globally over the last five years. This is the shortest average maturity for new debt at any given point during the 30 years of bank funding history covered by our analysis. As a related matter, we estimate that banks that we rate will face maturing debt of about $10 trillion between now and the end of 2015, $7 trillion of which will occur by the end of 2012."

Let's do the math: the US Gov't needs to roll about $3 trillion (and increasing) every year, Commercial Real Estate has a $3 trillion refi cliff around 2014 and the banking system has a $7 trillion roll maturity by 2012. In other words at or about 2012, or at the time Barack Obama is sure to be enjoying record approval ratings (high or low, your choice) courtesy of 30% unemployment, the American economy will be straddled with not just the ongoing burden of issuing about $2 trillion in debt each year to finance what can only be characterized as a budget concocted by the most hard-core, raving lunatics in the Federal Insane Asylum Reserve, but will have to deal with roughly $15 trillion of rolling maturities.

Full Moody's report for those who would rather see that the US economy is going to 10th circle of hell promptly, instead of buying Amazon stock at 1E10^18243 P/E, attached below.
http://www.zerohedge.com/article/us-lun ... -risk-2012" onclick="window.open(this.href);return false;

Then in 2008 after a number of years of glorious debt ramp up we hit the debt saturation point again. It has taken nearly 100 years since that secret meeting on Jekyll Island but the end game has finally arrived. At a couple points in 2008 it seemed as though the financial system would collapse (within hours of doing so) but the private banking cartel through their corporation, the Federal Reserve, transferred bad assets at market value to the Federal Reserve’s balance sheet….basically a shell game that put the burden upon the American taxpayer….a win/win situation for the banks. They have printed more money but a good portion has gone into the future’s markets to keep the price of commodities high while demand for those commodities drops. Basically keeping the sheeple believing that inflation will continue to be the theme versus deflation.

A short Google search of “Jekyll Island” and “banking” will provide one with some historical insight into a secret combination to get gain. We have been warned repeatedly of secret combinations. In fact Elder L. Tom Perry spelled it out in the following manner in his October 2005 Conference address:

The Book of Mormon is a voice of warning to this generation. See how vividly it describes conditions on the earth today:

“And no one need say [these records] shall not come, for they surely shall, for the Lord hath spoken it; for out of the earth shall they come, by the hand of the Lord, and none can stay it; and it shall come in a day when it shall be said that miracles are done away; and it shall come even as if one should speak from the dead.

“And it shall come in a day when the blood of saints shall cry unto the Lord, because of secret combinations and the works of darkness.

“Yea, it shall come in a day when the power of God shall be denied, and churches become defiled and be lifted up in the pride of their hearts; yea, even in a day when leaders of churches and teachers shall rise in the pride of their hearts, even to the envying of them who belong to their churches.

“Yea, it shall come in a day when there shall be heard of fires, and tempests, and vapors of smoke in foreign lands;

“And there shall also be heard of wars, rumors of wars, and earthquakes in divers places.

“Yea, it shall come in a day when there shall be great pollutions upon the face of the earth; there shall be murders, and robbing, and lying, and deceivings, and whoredoms, and all manner of abominations; when there shall be many who will say, Do this, or do that, and it mattereth not, for the Lord will uphold such at the last day. But wo unto such, for they are in the gall of bitterness and in the bonds of iniquity” (Morm. 8:26–31).

President Ezra Taft Benson reaffirmed the fact that the Book of Mormon is of particular value to our time when he said:

“The Book of Mormon was written for us today. God is the author of the book. It is a record of a fallen people, compiled by inspired men for our blessing today. Those people never had the book—it was meant for us. Mormon, the ancient prophet after whom the book is named, abridged centuries of records. God, who knows the end from the beginning, told him what to include in his abridgment that we would need for our day” (“The Book of Mormon Is the Word of God,” Ensign, May 1975, 63).

Among the lessons we learn from the Book of Mormon are the cause and effect of war and under what conditions it is justified. It tells of evils and dangers of secret combinations, which are built up to get power and gain over the people. It tells of the reality of Satan and gives an indication of some of the methods he uses.

Speaking of power and gain, in the October 1988 General Conference President Ezra Taft Benson boldly declared,

“I testify that wickedness is rapidly expanding in every segment of our society. (See D&C 1:14–16; D&C 84:49–53.) It is more highly organized, more cleverly disguised, and more powerfully promoted than ever before. Secret combinations lusting for power, gain, and glory are flourishing. A secret combination that seeks to overthrow the freedom of all lands, nations, and countries is increasing its evil influence and control over America and the entire world. (See Ether 8:18–25.)”

Also the Federal government (real Fed) has been loaning lots of money to the states for things like Medicaid and Unemployment to keep the politicians plump and happy….and support the bottom to enhance reliance on the Federal Government (buy votes and supporters who otherwise might riot and bring the system down since they don’t have anything left to lose). Why? Well at this stage of the game – end point – the focus changes from enticing people further into debt (mathematically, despite exotic shadow banking derivatives, no longer a possibility) to conducting an orderly transfer of assets to the banks. Go too fast and the frog will jump out of the pot before the water boils. People have a tendency to get violent and angry when they realize they no longer own anything and have become serfs…especially after enjoying a couple hundred years of freedom and prosperity that the rest of the world has never known.

The roll up strategy is currently being implemented in multiple arenas – banking (big banks eat all the little banks - who are dying, a couple at a time, every week), federal power (states were enticed into debt and now via federal handouts are giving up sovereignty and power by the week), banking law enforcement (the alphabet soup – DHS, NSA, TSA, FEMA, CIA, FBI, IRS, DIA, ATF, NORTHCOM, etc…are getting more power by the week). War is basically an amplified crisis (everything on a need to know basis) and thus is an extremely powerful mechanism for gaining control…especially a War on Terror that never ends, has no real identifiable enemy, and can create whatever enemies the bank controlled state desires.

Today the banks are global so their interests are not confined to our little nation…and the rest of the world is also quickly falling into their hands. Europe is a little ahead of us in the forced austerity ratchet down….but we aren’t far behind. In terms of our near future I see (for whatever its worth) another 20-30% drop in house prices over the next 6 to 12 months. I see rising interest rates on all credit products. I see massive defaults/bankruptcies (transfer of ownership). I see rising energy/food (tied together at the hip) costs. I see people struggling to pay back debt with dollars that are harder and harder to come by. I see the next wave in job losses hitting mid-summer 2011 due to the contraction of state and local governments as a result of budget cuts. I see serious battles breaking out between cities, counties, and states over funding. I see tremendous difficulties around the world in rolling over trillions (in now short term) debt that is coming due this year. The distance the politicians, the liaisons who don’t want to break the good news to us, can continue to kick the can down the road is getting less and less as banks (ultimately owned by a few global private investors) put the squeeze on maturity dates.

We have been warned over and over about debt and the consequences of debt. Elder Joseph B. Wirthlin stated in the April 2004 General Conference in his address “Earthly Debts, Heavenly Debts”,

In spite of the teachings of the Church from its earliest days until today, members sometimes fall victim to many unwise and foolish financial practices. Some continue to spend, thinking that somehow the money will become available. Somehow they will survive.
Far too often, the money hoped for does not appear.

Remember this: debt is a form of bondage. It is a financial termite. When we make purchases on credit, they give us only an illusion of prosperity. We think we own things, but the reality is, our things own us.

President Heber J. Grant said, “From my earliest recollections, from the days of Brigham Young until now, I have listened to men standing in the pulpit … urging the people not to run into debt; and I believe that the great majority of all our troubles today is caused through the failure to carry out that counsel.” 3

President Ezra Taft Benson said, “Do not leave yourself or your family unprotected against financial storms. … Build up savings.” 4

President Harold B. Lee taught, “Not only should we teach men to get out of debt but we should teach them likewise to stay out of debt.” 5

President Gordon B. Hinckley declared: “Many of our people are living on the very edge of their incomes. In fact, some are living on borrowings. …

“… I urge you to be modest in your expenditures; discipline yourselves in your purchases to avoid debt to the extent possible. Pay off debt as quickly as you can, and free yourselves from bondage.” 6

My brothers and sisters, many have heeded this prophetic counsel. They live within their means, they honor the debts they have incurred, and they strive to reduce the burden they owe to others. We congratulate those who are doing so, for the day will come when they will reap the blessings of their efforts and understand the value of this inspired counsel.

Elder L. Tom Perry in the October 1995 General Conference in his address “If Ye Are Prepared Ye Shall Not Fear” stated,

Necessary debt should be incurred only after careful, thoughtful prayer and after obtaining the best possible advice. We need the discipline to stay well within our ability to pay. Wisely we have been counseled to avoid debt as we would avoid the plague. President J. Reuben Clark fearlessly and repeatedly counseled members of the Church to take action.

“Live within your means. Get out of debt. Keep out of debt. Lay by for a rainy day which has always come and will come again. Practice and increase your habits of thrift, industry, economy, and frugality” (in Conference Report, Oct. 1937, p. 107).

Last but not least, our beloved Prophet, President Thomas S. Monson has promised us in his address “True to the Faith” during the April 2006 General Conference –

The final maka-feke I wish to mention today is one which can crush our self-esteem, ruin relationships, and leave us in desperate circumstances. It is the maka-feke of excessive debt. It is a human tendency to want the things which will give us prominence and prestige. We live in a time when borrowing is easy. We can purchase almost anything we could ever want just by using a credit card or obtaining a loan. Extremely popular are home equity loans, where one can borrow an amount of money equal to the equity he has in his home. What we may not realize is that a home equity loan is equivalent to a second mortgage. The day of reckoning will come if we have continually lived beyond our means.

MEASURING STICK:

Now that we have the background in place…What’s the most important political issue today? If we resolve our economic problems doesn’t that buy us time, at our leisure, to try and resolve the rest of our issues with the security that we’ll have a roof over our heads, 3 good meals a day, and the opportunity to work today for a better tomorrow? Or as the founding fathers more wisely put – Life, Liberty, and the pursuit of Happiness (property)? If that is the most important measuring stick and the one we can all unite on…which side of the fence do our politicians fall on? Do they work to incur more debt or to get out of debt? Do they work for the private banks or do they work for the people? Do they support a return to our Constitutional mandate for Congress to issue or coin money rather than private banks? How do we know?

“If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children wake up homeless on the continent their Fathers conquered...I believe that banking institutions are more dangerous to our liberties than standing armies... The issuing power should be taken from the banks and restored to the people, to whom it properly belongs." - Thomas Jefferson

“For behold, the Lord had blessed them so long with the riches of the world that they had not been stirred up to anger, to wars, nor to bloodshed; therefore they began to set their hearts upon their riches; yea, they began to seek to get gain that they might be lifted up one above another; therefore they began to commit secret murders, and to rob and to plunder, that they might get gain.

But behold, Satan did stir up the hearts of the more part of the Nephites, insomuch that they did unite with those bands of robbers, and did enter into their covenants and their oaths, that they would protect and preserve one another in whatsoever difficult circumstances they should be placed, that they should not suffer for their murders, and their plunderings, and their stealings.

Now behold, those secret oaths and covenants did not come forth unto Gadianton from the records which were delivered unto Helaman; but behold, they were put into the heart of Gadianton by that same being who did entice our first parents to partake of the forbidden fruit— Yea, that same being who did plot with Cain, that if he would murder his brother Abel it should not be known unto the world. And he did plot with Cain and his followers from that time forth. And also it is that same being who put it into the hearts of the people to build a tower sufficiently high that they might get to heaven. And it was that same being who led on the people who came from that tower into this land; who spread the works of darkness and abominations over all the face of the land, until he dragged the people down to an entire destruction, and to an everlasting hell. Yea, it is that same being who put it into the heart of Gadianton to still carry on the work of darkness, and of secret murder; and he has brought it forth from the beginning of man even down to this time. And behold, it is he who is the author of all sin. And behold, he doth carry on his works of darkness and secret murder, and doth hand down their plots, and their oaths, and their covenants, and their plans of awful wickedness, from generation to generation according as he can get hold upon the hearts of the children of men.” – Helaman 6:17, 21, 26-30

“And they did enter into a covenant one with another, yea, even into that covenant which was given by them of old, which covenant was given and administered by the devil, to combine against all righteousness. Therefore they did combine against the people of the Lord, and enter into a covenant to destroy them, and to deliver those who were guilty of murder from the grasp of justice, which was about to be administered according to the law. And they did set at defiance the law and the rights of their country; and they did covenant one with another to destroy the governor, and to establish a king over the land, that the land should no more be at liberty but should be subject unto kings.” 3 Nephi 6:28-30

“Wherefore, the Lord commandeth you, when ye shall see these things come among you that ye shall awake to a sense of your awful situation, because of this secret combination which shall be among you; or wo be unto it, because of the blood of them who have been slain; for they cry from the dust for vengeance upon it, and also upon those who built it up.” – Ether 8:24

“These are the times that try men's souls. The summer soldier and the sunshine patriot will, in this crisis, shrink from the service of their country; but he that stands it now deserves the love and thanks of man and woman. Tyranny, like hell, is not easily conquered; yet we have this consolation with us, that the harder the conflict, the more glorious the triumph....Heaven knows how to put a proper price upon its goods; and it would be strange indeed if so celestial an article as FREEDOM should not be highly rated.” – Thomas Paine

“Give me Liberty or give me death” – Patrick Henry

And may I conclude with more excerpts from President Ezra Taft Benson’s talk “I Testify” in the October 1988 General Conference address:

"I testify that America is a choice land. (See 2 Ne. 1:5.) God raised up the founding fathers of the United States of America and established the inspired Constitution. (See D&C 101:77–80.) This was the required prologue for the restoration of the gospel. (See 3 Ne. 21:4.) America will be a blessed land unto the righteous forever and is the base from which God will continue to direct the worldwide latter-day operations of His kingdom. (See 2 Ne. 1:7.)

I testify that as the forces of evil increase under Lucifer’s leadership and as the forces of good increase under the leadership of Jesus Christ, there will be growing battles between the two until the final confrontation. As the issues become clearer and more obvious, all mankind will eventually be required to align themselves either for the kingdom of God or for the kingdom of the devil. As these conflicts rage, either secretly or openly, the righteous will be tested. God’s wrath will soon shake the nations of the earth and will be poured out on the wicked without measure. (See JS—H 1:45; D&C 1:9.) But God will provide strength for the righteous and the means of escape; and eventually and finally truth will triumph. (See 1 Ne. 22:15–23.)

I testify that it is time for every man to set in order his own house both temporally and spiritually. It is time for the unbeliever to learn for himself that this work is true, that The Church of Jesus Christ of Latter-day Saints is the kingdom which Daniel prophesied God would set up in the latter days, never to be destroyed, a stone that would eventually fill the whole earth and stand forever. (See Dan. 2:34–45; D&C 65:2.) It is time for us, as members of the Church, to walk in all the ways of the Lord, to use our influence to make popular that which is sound and to make unpopular that which is unsound. We have the scriptures, the prophets, and the gift of the Holy Ghost. Now we need eyes that will see, ears that will hear, and hearts that will hearken to God’s direction.

I testify that not many years hence the earth will be cleansed. (See D&C 76:41.) Jesus the Christ will come again, this time in power and great glory to vanquish His foes and to rule and reign on the earth. (See D&C 43:26–33.) In due time all men will gain a resurrection and then will face the Master in a final judgment. (See 2 Ne. 9:15, 41.) God will give rewards to each according to the deeds done in the flesh. (See Alma 5:15.)"

creator · Post by **creator** » February 21st, 2011, 6:54 pm

You all may want to considering giving your feedback to this article on LDSLiberty.org : http://www.ldsliberty.org/the-political ... ing-stick/" onclick="window.open(this.href);return false;

Teancum-Old · Post by **Teancum-Old** » February 23rd, 2011, 4:00 pm

Mummy wrote:
BrianM wrote:
Mummy wrote:so you are saying that every time the money trades hands it multiplies by 10??? If that were true we really would have hyperinflation!
If you re-read what I wrote, carefully, you'll see that I never said the money multiplies, the money simply trades hands many many times... meaning that one physical dollar, while it doesn't multiply, it could be used 1 million times...

you've got to now rework the scenario because there is no inflation either.
...take out the inflation.....you still have to pay back more money than was created....which inherently and ironically is deflationary!

What part of the scenario doesn't work?

BrianM wrote:in my scenario 1,000,000 was put into the system, and 2,000,000 will be the total repayment because of interest... considering that the 1,000,000 is going to continue to circulate, that 1,000,000 eventually ends up trading hands 100 times! ($100,000,000), eventually all the debt and interest could be paid off.
I read it and reread it.....and it still appears (to me) that you are saying $1,000,000 somehow multiplies into $100,000,000 due to the velocity of money (how fast money changes hands).

Anyways, using your scenario above....where does the extra million come from to pay the interest?

Mummy, I think Brian has a point here.

Allow me to re-state the problem because I believe the numbers got mixed up a bit in the exchange above.

As Brian stated it, we have 10 people, one of whom is a banker (who is not in the fractional reserve business). I will assume that these folks were previously working through a barter economy and therefore there was no single currency. The banker (10th person in this scenario) then proposes to create a bank, with it will be the creation of money, which he claims will make the economy more efficient thereby replacing the old barter economy. He offers loans of $100,000 to each of the other 9 individuals at 10% interest (to be paid back in 10 years) in order to open up the new economy. Thus the new venture injects $900,000 of fresh cash into the economy (inflation is undefined here since they never had a signle currency before there is no way to calculate it). Calculating this loan out yields a payment of $1,321.51 per month on each loan, or a total of $158,580.88 over the 120 month life of the loan. Between 9 loans, the total to be repaid to the banker is $1,427,227.96. Assuming all the debtors are able to repay their loans, the banker will make a nice profit of $527,227.92.

So at the end of year 1, the banker rakes in $142,722.80 in loan payments from the 9 debtors. At the end of year 2, his total goes to $285,445.59. Year 3, 428168.39... And so on. By the end of year 6, his total is now at $856,336.77. Since there is only $900,000 of cash available in the economy, what happens in year 7??

It appears to me that according to Mummy, the banker will pocket his cash (indefinitely?), not using a single dime. This being the case, seeing that there is only $43,663.23 left in the economy, he simply begins seizing all the property of the 9 debtors as they can no longer continue paying off their loan, since the cash is not available in the economy anymore.

But this is Brian's point, I believe. The banker is not simply stashing away all the cash he is raking in from the loan payments. He has to buy food, clothing, shelter and fuel for his family, obviously. He will also, I believe, use some of his profits to satisfy his family wants apart from their needs (latest technology, books, music, art, dining out, entertainment, etc.) Because this is a closed economy we are talking about, he must necessarily spend his earned income (from the interest earned on the loans) on products and services from none other than the original 9 debtors. By buying products and services from the 9 debtors, they have now earned some of their interest payments back from the banker. So whereas they each started with $100,000 in borrowed cash, they also EARN cash later depending on the sale of their own products and services.

So let's say the banker reaches the end of year 1 with his $142,722.80 in complete loan payments. He has personally collected a total $15,858.09 from each debtor. But he has paid Debtor #1 about $5000 in return for agricultural goods that year. Does this mean that the banker will subtract $5000 from the amount Debtor #1 has repaid on the loan? Of course not! Thus Debtor #1 now has an additional $5000 that he may now use to pay down more if his debt to the banker after having $15,858.09 already paid.

The banker will necessarily have to do the same thing each year with many of the debtors in such an economy. The money is not being multiplied but it is being used more than once as it is being rotated through the economy. Although the debtors only received $900,000 initially, they can earn some cash (from the banker himself and indirectly through other debtors) needed to pay off some (or all??) of the interest on their loans.

Ultimately, the banker will spend the money he makes from this venture which will cycle back through the economy. He will also likely use the income earned from interest to invest in more loans.

I understand this cycling of cash through the economy is referred to as velocity. Assuming the velocity is low (banker pockets all his money and never uses it) will result in the hypothetical scenario Mummy puts forth. But if velocity is such that money is cycling through the economy unperturbed (banker spends it in the economy), then property seizures are not necessarily a foregone conclusion.

Is this correct?

Mummy wrote:Anyways, using your scenario above....where does the extra million come from to pay the interest?

I believe it comes from labor which produces goods and services in demand. Money velocity in an economy requires money to change hands in exchange for goods and services produced through labor. Mummy seems to imagine an economy where a banker can remain completely independent from it.

Jason · Post by **Jason** » February 23rd, 2011, 5:02 pm

Teancum wrote:Mummy, I think Brian has a point here.

Allow me to re-state the problem because I believe the numbers got mixed up a bit in the exchange above.

As Brian stated it, we have 10 people, one of whom is a banker (who is not in the fractional reserve business). I will assume that these folks were previously working through a barter economy and therefore there was no single currency. The banker (10th person in this scenario) then proposes to create a bank, with it will be the creation of money, which he claims will make the economy more efficient thereby replacing the old barter economy. He offers loans of $100,000 to each of the other 9 individuals at 10% interest (to be paid back in 10 years) in order to open up the new economy. Thus the new venture injects $900,000 of fresh cash into the economy (inflation is undefined here since they never had a single currency before there is no way to calculate it). Calculating this loan out yields a payment of $1,321.51 per month on each loan, or a total of $158,580.88 over the 120 month life of the loan. Between 9 loans, the total to be repaid to the banker is $1,427,227.96. Assuming all the debtors are able to repay their loans, the banker will make a nice profit of $527,227.92.

OK...$900,000 in and $1,427,227.96 that has to come out. 9 players have $900,000 and Banker has zero

So at the end of year 1, the banker rakes in $142,722.80 in loan payments from the 9 debtors.

End of Year 1 - Banker collects $142,722.80 to spend as he desires (15.85% of the total cash in the economy). Assuming equality - other 9 players have $84,141.91 each. Assets begin flowing to the banker or creator of the debt.

At the end of year 2, his total goes to $285,445.59.

End of Year 2 - Banker collects another $142,722.80 to spend as he desires (raising the total amount of cash he as received to 31.72%). Assuming the banker hasn't spent any money and equality - the other 9 players have $68,283.82 each. If the banker has purchased assets or services then the players who dealt with the banker would have more money - he has control/power over the economy. Those who didn't work for or sell to the banker would face bankruptcy first!

Year 3, 428168.39... And so on.

End of Year 5 - Banker collects another $142,722.80 to spend as he desires (raising the total amount of cash he as received to $713, 614 or 79.29%). At this point, if not much earlier, the banker probably sets the prices for all goods and services in the economy.

By the end of year 6, his total is now at $856,336.77.

End of Year 6 - Banker collects another $142,722.80 to spend as he desires (raising the total amount of cash he as received to $856, 336.8 or 95.15%).

Since there is only $900,000 of cash available in the economy, what happens in year 7??

Year 7 - There is only $43,663.20 cash available to meet the debt obligation of $142,722.80 which is roughly $15,858 a piece for the other 9 players assuming equality and no Banker spending.

By this point the Banker has complete control of the economy as he divvies out favors to some players and bankrupts and seizes the property of others - then selling to the remaining players. This would require some diversions of course....pit the players against each other to keep them from teaming up on the banker (much discretion on his part). Probably best accomplished by polarizing the people against each other on issues he could care less about. A two party political system would probably be a very early effort on his part.

Interesting that it always happens in year 7 - see story of Egyptians!

Another fascinating aspect of Year 7 is Shemitah or the sabbatical year -

“The seventh year serves to rectify the social ills and inequalities that accumulate in society over the years. When poorer segments of society borrow from the wealthy, they feel beholden to the affluent elite. “The debtor is a servant of the lender” [Proverbs 22:7]. This form of subservience can corrupt even honest individuals in their dealings with the rich and powerful. The Sabbatical year comes to correct this situation of inequality and societal rifts, by removing a major source of power of the elite: debts owed to them.”

Here's the kicker - the Banker could even print (no IOU...no interest...just print the money) the money to cover the $527,227.92 interest cost.....but $527k of assets/labor would still flow to the bank in return for his purchase injection into the economy - thus raising prices for everyone else - they lose although they now may not default on the debt!

It appears to me that according to Mummy, the banker will pocket his cash (indefinitely?), not using a single dime. This being the case, seeing that there is only $43,663.23 left in the economy, he simply begins seizing all the property of the 9 debtors as they can no longer continue paying off their loan, since the cash is not available in the economy anymore.

But this is Brian's point, I believe. The banker is not simply stashing away all the cash he is raking in from the loan payments. He has to buy food, clothing, shelter and fuel for his family, obviously. He will also, I believe, use some of his profits to satisfy his family wants apart from their needs (latest technology, books, music, art, dining out, entertainment, etc.) Because this is a closed economy we are talking about, he must necessarily spend his earned income (from the interest earned on the loans) on products and services from none other than the original 9 debtors. By buying products and services from the 9 debtors, they have now earned some of their interest payments back from the banker. So whereas they each started with $100,000 in borrowed cash, they also EARN cash later depending on the sale of their own products and services.

But as long as no new money is created.....they are in debt to the banker and he grows wealthier and more powerful by the year.

So let's say the banker reaches the end of year 1 with his $142,722.80 in complete loan payments. He has personally collected a total $15,858.09 from each debtor. But he has paid Debtor #1 about $5000 in return for agricultural goods that year. Does this mean that the banker will subtract $5000 from the amount Debtor #1 has repaid on the loan? Of course not! Thus Debtor #1 now has an additional $5000 that he may now use to pay down more if his debt to the banker after having $15,858.09 already paid.

The banker will necessarily have to do the same thing each year with many of the debtors in such an economy. The money is not being multiplied but it is being used more than once as it is being rotated through the economy. Although the debtors only received $900,000 initially, they can earn some cash (from the banker himself and indirectly through other debtors) needed to pay off some (or all??) of the interest on their loans.

Unless "new money" (debt or some other mechanism) is created.....it is mathematically impossible for all 9 players to be made whole. The money can change hands as fast as you want but it won't multiply.....if it does Treasury department will shortly be knocking on your door.....followed by the IRS.

Ultimately, the banker will spend the money he makes from this venture which will cycle back through the economy. He will also likely use the income earned from interest to invest in more loans.

Outstanding....more IOUs. More wealth and power to the Banker!!!

I understand this cycling of cash through the economy is referred to as velocity. Assuming the velocity is low (banker pockets all his money and never uses it) will result in the hypothetical scenario Mummy puts forth. But if velocity is such that money is cycling through the economy unperturbed (banker spends it in the economy), then property seizures are not necessarily a foregone conclusion.

Is this correct?

That would be a negative ghost rider! Everything won't be equal so some will default earlier than others....and the banker will have total control of whom and when through his divvying money back into the economy.

Mummy wrote:Anyways, using your scenario above....where does the extra million come from to pay the interest?
I believe it comes from labor which produces goods and services in demand. Money velocity in an economy requires money to change hands in exchange for goods and services produced through labor. Mummy seems to imagine an economy where a banker can remain completely independent from it.

No....money can change hands infinitely...but more goods and services don't produce more cash. He who controls the printing press or credit facility controls the economy! In our case, rather than government (organization representing the people) we have private banks. Its in the best interest of the banker not to remain completely independent....but to weave his influence and control (via currency) throughout the economy and government.

This isn't even touching the issue of inflation (new money flows into the economy raising the prices on everything).....and deflation (the other 9 players desperate scramble to meet their loan obligations via labor value reduction, goods price reduction, fraud, collusion, etc in order to get the cash to satisfy their debts).

Teancum-Old · Post by **Teancum-Old** » February 24th, 2011, 2:36 pm

Mummy wrote:the banker will have total control of whom and when through his divvying money back into the economy.

Mummy wrote:He who controls the printing press or credit facility controls the economy!

On the points above, I believe you have no disagreement. You are preaching to the choir! Of course, under this scenario, the banker in this scenario will have all the power since everyone else is in debt to him. This is in agreement with the prophetic counsel which equates debt to slavery. But his use of that power is a major question in understanding this scenario...

The one point that I have trouble with (and I believe Brian does/did too) is your repeated assumption that because only a finite amount of cash was initially created ($900K in this scenario), it would be "mathematically impossible" for the debtors to pay the principal ($900K) + interest ($527K). This is simply not the case. Some of the debtors will likely be able to pay off their debt, if they are saavy enough, by reaping back some cash from the banker through future business deals in this close economy. You admit this here:

Mummy wrote:By this point [Year 7]the Banker has complete control of the economy as he divvies out favors to some players and bankrupts and seizes the property of others - then selling to the remaining players.

and here:

Mummy wrote:Unless "new money" (debt or some other mechanism) is created.....it is mathematically impossible for all 9 players to be made whole.

Whereas previously you simply stated that paying off the principal + interest was impossible, you have now opened the door to the idea that "some" repayment of the interest (above and beyond the principal) is possible even though only $900K exist in this theoretical economy. Extrapolating this out, I have yet to see you prove how a complete payment of principal + interest by all 9 debtors is mathematically impossible if we assume the banker is not corrupt (i.e. a righteous banker. Is this possible??? Perhaps we need another thread to cover that discussion

) ) and that he, as part of this closed economy, will have to rely on others to supply him with his needs and wants through economic transactions.

The "favors" you mention here:

Mummy wrote:By this point [Year 7]the Banker has complete control of the economy as he divvies out favors to some players and bankrupts and seizes the property of others - then selling to the remaining players.

are not necessarily corrupt (again, depending on the righteousness of the banker)... Legitimate economic transactions will take place, as mentioned earlier, such as when the banker:

Teancum wrote:has to buy food, clothing, shelter and fuel for his family, obviously. He will also, I believe, use some of his profits to satisfy his family wants apart from their needs (latest technology, books, music, art, dining out, entertainment, etc.) Because this is a closed economy we are talking about, he must necessarily spend his earned income (from the interest earned on the loans) on products and services from none other than the original 9 debtors.

Assuming a corrupt banker, the following would be true:

Mummy wrote:This would require some diversions of course....pit the players against each other to keep them from teaming up on the banker (much discretion on his part). Probably best accomplished by polarizing the people against each other on issues he could care less about. A two party political system would probably be a very early effort on his part.

But what if we assume an honest, righteous banker. Is it not a possibility that the original 9 debtors can completely pay off their debt in such a closed economy?? If not, please provide mathematical proof that employs the concept of velocity.

Songbird · Post by **Songbird** » February 24th, 2011, 3:03 pm

Wow! That is a lot to take in when you are not financially savvy. Thank you so much.

My house is paid off and I have no debt, currently we do have an income, but what happens in the futre, when utilities are so high we can't afford them, (possibly because of job loss) and taxes on the property. That is what worries me...I have put all this money into the house and I lose it because I can't pay my taxes?

Jason · Post by **Jason** » February 24th, 2011, 3:50 pm

Teancum wrote:
Mummy wrote:the banker will have total control of whom and when through his divvying money back into the economy.

Mummy wrote:He who controls the printing press or credit facility controls the economy!
On the points above, I believe you have no disagreement. You are preaching to the choir! Of course, under this scenario, the banker in this scenario will have all the power since everyone else is in debt to him. This is in agreement with the prophetic counsel which equates debt to slavery. But his use of that power is a major question in understanding this scenario...

The one point that I have trouble with (and I believe Brian does/did too) is your repeated assumption that because only a finite amount of cash was initially created ($900K in this scenario), it would be "mathematically impossible" for the debtors to pay the principal ($900K) + interest ($527K). This is simply not the case. Some of the debtors will likely be able to pay off their debt, if they are saavy enough, by reaping back some cash from the banker through future business deals in this close economy. You admit this here:

UNLESS MORE money is created via MORE debt (players) or printing (banker or players).....it is mathematically impossible. What I admit is that some players will in all likelihood get more cash than others and default will not be simultaneous. This isn't the point (so what if you default earlier or later - when you are going to default....or you are the sellout schmuck who is the last man or two standing kissing the banker's hiny)....the point is that it is mathematically impossible to pay the debt and that the fundamental design of the system effectively transfers all assets (and control over the economy) to the bank. The other aspect is that in order for one to succeed (win - not default) someone else has to lose (default or loss of assets....slavery) - GAMBLING - and is inherently evil!

Mummy wrote:By this point [Year 7]the Banker has complete control of the economy as he divvies out favors to some players and bankrupts and seizes the property of others - then selling to the remaining players.
and here:

Mummy wrote:Unless "new money" (debt or some other mechanism) is created.....it is mathematically impossible for all 9 players to be made whole.
Whereas previously you simply stated that paying off the principal + interest was impossible, you have now opened the door to the idea that "some" repayment of the interest (above and beyond the principal) is possible even though only $900K exist in this theoretical economy. Extrapolating this out, I have yet to see you prove how a complete payment of principal + interest by all 9 debtors is mathematically impossible if we assume the banker is not corrupt (i.e. a righteous banker. Is this possible??? Perhaps we need another thread to cover that discussion ) ) and that he, as part of this closed economy, will have to rely on others to supply him with his needs and wants through economic transactions.

I have yet to see you point out where the money for interest comes from that will make ALL of the players whole (able to pay off debt) at the end of the game.

$900,000 is created....the obligation is $1,427,227.96

Unless one of the players prints up some money in his garage.....or the banker prints some money.....or the players take out more LOANS (IOUs - new money with more interest attached) which will satisfy the current obligation but will only raise the total debt obligation - i.e. a short term solution.

If a million people pass a $100 back and forth to each other.....there is no magic creation of additional money. That's how the banks can control the economy by shrinking or expanding the money supply (through credit or printing). In a system where the money is created by debt.....there is a limit based on people's ability to service debt (debt saturation point) that is a mathematical end point for money created by debt.

The "favors" you mention here:

Mummy wrote:By this point [Year 7]the Banker has complete control of the economy as he divvies out favors to some players and bankrupts and seizes the property of others - then selling to the remaining players.
are not necessarily corrupt (again, depending on the righteousness of the banker)... Legitimate economic transactions will take place, as mentioned earlier, such as when the banker:

Teancum wrote:has to buy food, clothing, shelter and fuel for his family, obviously. He will also, I believe, use some of his profits to satisfy his family wants apart from their needs (latest technology, books, music, art, dining out, entertainment, etc.) Because this is a closed economy we are talking about, he must necessarily spend his earned income (from the interest earned on the loans) on products and services from none other than the original 9 debtors.
Doesn't matter whether righteous or corrupt - unless the banker prints himself more money or new debt is created.....THERE IS NO MORE NEW MONEY.

Assuming a corrupt banker, the following would be true:

Mummy wrote:This would require some diversions of course....pit the players against each other to keep them from teaming up on the banker (much discretion on his part). Probably best accomplished by polarizing the people against each other on issues he could care less about. A two party political system would probably be a very early effort on his part.
But what if we assume an honest, righteous banker. Is it not a possibility that the original 9 debtors can completely pay off their debt in such a closed economy?? If not, please provide mathematical proof that employs the concept of velocity.

I loan your family $500 bucks with $100 interest charge. Your family members work for each other - pay each other money for goods/services to your hearts content. Only $500 goes in the door to your home and $600 has to come out....where do you get the extra $100???

Now throw in the inflation/deflation wrench - With the expansion of your money supply with the new debt the value ($$$) of your goods/services will increase (expanding the money supply - everyone has a fresh load of cash - goods/services cost more.....more money with relatively the same amount of goods/services). As interest is paid out (shrinking the money supply in your home) the value of your goods/services to each other will drop (money is harder to come by - each payment of principle and interest lowers the total amount of money in circulation).

Say half way through the time period your family members are hurting (less money) and offer me some services/goods. If I pay for those goods/services with your borrowed money (principle and interest payments).....the total amount of money in circulation stays the same. But now one of your family members just lost out on providing goods/services and will default prior to the others.

Say your family is hurting and borrows another $500 to meet obligations along with the $100 interest charge. Now the money supply is $1000 in and $1200 that has to come out.....you delayed the day of reckoning a while longer.....and will repeat the inflation/deflation revolution (business cycle).

You could keep extending the time until the day of reckoning by borrowing more money up until you run out of assets and your labor is worthless.....

Effectively the design of our little monetary system transfers ownership of your family assets and the right to your family's future labor to me.....and if I create the money out of nothing (paper printing costs) against the IOU note that you sign for the loan......it costs me nothing!

creator · Post by **creator** » February 25th, 2011, 4:09 am

Mummy wrote:I loan your family $500 bucks with $100 interest charge. Your family members work for each other - pay each other money for goods/services to your hearts content. Only $500 goes in the door to your home and $600 has to come out....where do you get the extra $100???

Where do I get the extra $100? From you! You pay me $100 to mow your lawn B-) problem solved.

Glad to see someone else chiming in, and catching on to what I see as a hole in the theory presented...

To summarize... Mummy, you are saying it's mathematically impossible, without new debt or new money printed/pumped into the system, to pay off all the debt and interest.

The problem I see is that while you're saying it's "mathematically impossible" you're only using the scenario's that make it impossible and not the scenario's which reveal it is possible... if we're just trying to see what's mathematically possible we can use any scenario, however unlikely or unrealistic, so long as it is also possible scenario.

What has been presented by myself, and teancum, is that there are possible scenario's which reveal the hole and show that it is in fact mathematically possible to pay off all the debt and interest without taking on new debt, or feeding more money into the system.

One more simple example...

Mr. Smith owes $130,000 to Mr. Banker. This is the total of his loan plus interest... Mr. Smith built a huge slide, and people pay him $100 to slide down his slide. Mr. Banker happens to love slides, he loves them so much, he slides down the slide about 10 times a day - thus Mr. Banker is giving Mr. Smith $1000/day! Mr. Smith takes that $1000/day and gives it right back to Mr. Banker... Thus we see that the same $1000 continues to circulate between Mr. Banker and Mr. Smith... No new money into the economy, no additional debt, just a circulating exchange... Therefore the debt Mr. Smith owes to Mr. Banker is decreasing by $1000/day, and within 130/days Mr. Smith is debt free! No new debt, no new money into the economy... And all the other people in the community also happen to offer a product or service that Mr. Smith loves just as much, so eventually they too have their debts paid off. Everyone is debt free, and the money continues to be exchanged for the various products and services available in the community. Oh, and Mr. Banker had to switch professions after all the debts got paid off.

You see - It is mathematically possible, under certain possible scenario's, while maybe not likely or realistic, it is mathematically possible to pay off all the debt and interest, without new debt or new money.

ithink · Post by **ithink** » February 25th, 2011, 5:37 am

I will come out of hiding for the moment to comment on this because it is of paramount import right now. I would have expected a little more intelligent research into this topic than I have seen on this board over the last three years. What is more incredible, is the fervor with which the typical closed minded conservative crowd refuse to address the underlying problem with the overarching financial systems of the planet.

No, it is not mathematically possible to pay off any of the debt that is in existence today because we are compelled to re-borrow principal AND interest as subsequent sums of debt. As the principal is re-borrowed, more of the subsequent principal is required to maintain the circulation. This alone makes it not just impossible to pay debt off, but in fact, impossible to pay it down, and as long as the circulation is maintained, this process is irreversible. In addition, since more and more of the principal of subsequent money is required to cover the increase in interest, the money borrowed is incrementally and exponentially less able to sustain industry and commerce like it was intended to do.

"Such a system therefore can only expire at a maximum practical lifespan, at which it imposes upon its unwitting subjects a terminal sum of debt. When the music stops playing, no chairs are left, because they have all been taken by inherent, escalating dispossession, which of course ultimately results in complete dispossession. When the music stops, all the players trying to sit can only fall down. By only subverting the nature of currency, the central bank ultimately makes itself the real owner of all the chairs. " Mike Montagne

900 years ago, anyone practicing usury was excommunicated from the Christian church. With that in mind, I can only say God help you all that continue to sustain this bastard financial system child of the devil, because if I was in a position to do so, I would start purging in the same way that old Christian church did. Yes, it is that serious. I also agree with Mr. Montagne that the replacement of this repugnant system of ours would include trials for it's leaders for crimes against humanity, and certainly nothing less than disdain for all those that continue to uphold it.

It takes grade 5 math to understand what I am talking about. See if you are up to it. For those of you whose interest is piqued, see this page at http://perfecteconomy.com/pg-if-i-were-president.html" onclick="window.open(this.href);return false;, a great place to start. Note that I have paraphrased Mike in my first paragraph of this reply.

7cylon7 · Post by **7cylon7** » February 25th, 2011, 7:06 am

I could in fact live my entire life without using debt at all.

I could work and exchange my time for some silver or gold or fiat money.

I could save up this money over time and pay full price for a small piece of land. I could make a grass hut with mud. Paid for in full.

I work some more.... save some money.... over and above my cost to live. Expand my land purchase for full price. no interest and no debt. I buy a land that produces food, cotton, water, oil ect....

I have just shown how you can live your entire life without ever going into debt.

It takes time, you have to start small, you can't have it now and all at once unless you enherit money, or land from your parents.

The problem comes with greed and the unwillingness to WAIT. Going into debt says you can have it now. You don't have to wait. Satify you wants now and pay later. or pay a little extra over time. and just like you have shown you end up paying twice as much as you would have if you would of just paid for it in full up front. but to pay in full up front you have to wait and save and you have to start small.

in fact this is what Brigham young suggested how you get rich. If everyone would do this the internatiolal banker would get zero. We would only need a bank to hold extra money in a safe place for a time.

Debt is a trap, it is suductive. in small amounts can be useful but most go overboard with greed and get themselves in too deep. just like this government has.

The main problem with the fed imo is that the profits go to private individuals. What if the goverment really own the fed. The fed could pay off all government programs. Taxes could be reduced government could take all that money and pay for all its programs.... well maybe not all but most.... or as in Ben Franklin days he said the reason we were so successful was because they gave out interest FREE loans and only put enough money in the market to support free trade. That is all that money needs to do. to enable the free flow of goods as changing a good for a good is very hard to do. That is why money needs to be divisiable easily.

Skousen thinks that in the millineium money will be backed by silver and gold. Even in the united order. Their will be two systems running in the millineium. The united order for those temple worthy members and for non members a free enterprise system but both based on money backed by silver and gold.

it will be interesting to see how this will all work out.

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