Say what you will, "pieces of gold" or "dollars". It is the same thing

There is a BIG difference... unless you know of a way to multiple Gold.

Know, not believe.
Banks take money, they do not create it. They do give out money that they don't have (either formally, or taking from someone else), but that is not "creating" money. At best, one can consider it a snowball system, but never "creating" money.

It's the exact opposite of what you are saying. Real money disappears in their pocket in exchange for a promise.

I realize the truth might come as a shock to some people.

If you can't accept it, that's fine. Carry on.

Say what you will, "pieces of gold" or "dollars". It is the same thing

There is a BIG difference... unless you know of a way to multiple Gold.

Know, not believe.
Banks take money, they do not create it. They do give out money that they don't have (either formally, or taking from someone else), but that is not "creating" money. At best, one can consider it a snowball system, but never "creating" money.

It's the exact opposite of what you are saying. Real money disappears in their pocket in exchange for a promise.

I realize the truth might come as a shock to some people.

If you can't accept it, that's fine. Carry on.

Well let's assume that banks are making money from nothing (I'm not commenting on the validity of this, I'm just assuming it for the sake of argument). Why would they want to give it out and not get all of it back? Because they can make more? It's still a loss, one way or another. Say I lend out dirt to people, which I could just dig up. There's no reason for me to want to do that unless I know I'm at least going to get it back.

100% of the principle at zero interest, marks the "overdebt" line.

...

Money increases, and yet so does debt, but debt increases even more so than the money. While money remains easily visible, debt becomes "out of sight and out of mind". People tend to notice where money goes, while they ignore the influence of debt upon money. It lacks balance.

This is the part that doesn't track, and makes it difficult for me to assess the rest of the argument. Here is why I don't find it convincing:

1. The money supply isn't limited to outstanding loans. There is a huge pool of money that is in the economy right now and not related to any current loans, and the interest on a new loan can come from that at least as easily as from anywhere else.

2. Banks don't destroy money when they recover a loan, so the interest (even if it were to come directly from a fresh loan issued by another bank, or even the same bank) doesn't pull money out of the economy. There is no deflationary pressure in this process.

3. As we've established upthread, the money that banks create is identical to other money. Debt doesn't grow faster than the money (at minimum, not necessarily) because of 1 and 2, above. There already exists money to pay the interest (and any other fees there might be), and all of that money remains in the economy along with any new money generated by the loan.

None of that is to say that the system is perfect, or desirable, or that better alternatives don't exist. But the specific problem you've put forward here is that more money is owed than exists due to the practice of charging interest on loans, forcing deflation and then additional serious economic maladies. Debt definitely has a variety of effects on the economy and on people, but an ever-more-constrained supply of money doesn't seem to be one of them.

If you have some evidence that the value of outstanding, non-collateralized loans is greater than the outstanding supply of money, or has been steadily trending in that direction, or something like that, it would go a long way towards persuading me. If not, then the key point on which your argument rests is, to all appearances, nonexistent.

horror stories in the press about low paid teachers who found themselves 300k in debt from only a 10k position

That's highly dubious. This is only possible if they took up loans to do their "investments" or if they did futures or huge short sales.

So you haven't heard of leverage?

Futures and short sales... well, nobody will let a low paid teacher trade futures or go short (no way!). Heck, they're not even allowing me to sell short. You gotta be something like... dunno, a bank owner or something to do that.

Which leaves only "normal" investments that these teachers could have taken. Like stocks, options, or fonds. Any of which will be worth zero in the very worst case, but will never leave you in debt.

There is also Spreadbetting, Binary Options and CFDs.. Anybody in the UK who passes a basic credit score can get an account with a broker and do this and they will let you go short. This is how the majority of day traders in the UK make money.

(read carefully)

The bank is the third-party in a transaction. The bank "advances" money to the seller on behalf of the purchaser. The money takes place of a promise from the purchaser; now the purchaser is in debt to the bank instead. It's going to cost the purchaser more now, because of interest.

The pressure is now on the "purchaser", who is now at the mercy of both the "seller" and the "bank" to recover enough money to repay on time or risk losing what was purchased or more.

Now let's up the ante and make things even more difficult for our "purchaser" by introducing a fourth-party: the Government who demands taxes from every transaction.

As the money scatters, each party will negotiate a different price based on their needs/wants, and the "purchaser" may lose a little negotiating power because of the pressure to pay on time. So far, only the Government has received money for nothing, after taxing the "seller" on the very first transaction since the introduction of "money".

The "purchaser" tries to work/trade with both the "seller" and Government for all the money they have, but the "purchaser" is taxed every time (oh, what fun). Even if the "purchaser" gets back every bit of money that was put into circulation, it is only enough to cover the principle but not the interest to the "bank". The "bank" could spend some of the money it receives until eventually the "purchaser" finally makes good on its promise and becomes debt free. Now the "bank" has become a member of the money for nothing club.

Suppose the "bank" didn't want to spend any of the money it received, then there wouldn't be enough money available in circulation for our borrower the "purchaser" to pay the interest with. The "bank" could let the "purchaser" default on the loan but the borrower has nothing the "bank" wants and besides, the "bank" enjoys being on the something for nothing circuit and so prefers the "purchaser" keep working. The "bank" can lend the money to somebody else at interest, but this only creates a bigger debt until the "bank" starts spending some of its money.

The "bank" has no choice but to inflate the money supply, so it "creates" new money.

Hmm. Probably best to read that last line, again.

You may have noticed, this puts the "bank" in a very powerful position. Not only does the Government receive money for nothing, but now the "bank" has jumped on the something for nothing train/wagon. No matter which bank you go to, with power to create "credit" being out of your hands, the stage is set.

The "seller" and the "purchaser" have no idea what the "bank" is actually doing, so they play along unquestioningly (to their own detriment), while the Government turns a blind eye to it all.

Now if borrowers were savvy, they might realize that the debt ought to be less than the sum of that "created" money, as after all, "Who are the banks to expect so much in return for literally nothing?".

Is there a better system? It's never about the system. It's about people and how they treat each other. I could recommend one impartial-objective system after another, and every single one could either succeed or fail based on how people treat each other.

In this case, it is about how borrowers are treated (or allow themselves to be treated) with debt on "created" money. You either see the imbalance or you deliberately don't want to see it. You either notice the domino effect on people psychologically or you choose to ignore it. The same goes for land: Either people want to acknowledge that descendants of three or more subdivides land, two descendants sustains the division of land, while one descendant will consolidate land (assuming there is any land to inherit) or people don't want to acknowledge it, and people either acknowledge the effects of overcrowding or they pretend it has no bearing.

This is an ideal time for civilization introspection. Don't waste it.

BR

(read carefully)

I have read all of your posts in this thread carefully. Even the snide ones.

Re-reading this post I see that I've used "borrower" and "purchaser" interchangeably-- they refer to the same agent in what follows.

The bank is the third-party in a transaction. The bank "advances" money to the seller on behalf of the purchaser. The money takes place of a promise from the purchaser; now the purchaser is in debt to the bank instead. It's going to cost the purchaser more now, because of interest.

I have not been limiting my definition of loans to this type, where the bank is involved in any way with the seller. But I'm not sure it matters; when I have been talking about loans it was under the assumption that the borrower had a specific intent for the money and did not plan to hold it in any particular way. Just for clarity's sake, are you drawing any distinction between a personal loan for cash and a loan directly involved in a purchase (like a car loan)? Are you including access to credit through credit cards? In any of these cases, yes, using a loan to finance a purchase will cost the borrower more than making the purchase directly without a loan. It's the cost of accessing money now, when they don't have it. Also, again for clarity, this is the point where money is created by the bank (assuming that they are taking advantage of the availability of leverage against money actually in the bank). The money goes to the seller, who then pays it out in wages, operating expenses, etc. It is now in the economy, and and the money supply has expanded.

The pressure is now on the "purchaser", who is now at the mercy of both the "seller" and the "bank" to recover enough money to repay on time or risk losing what was purchased or more.

The pressure is indeed on the borrower (or "purchaser", if you prefer) to earn/find enough money to pay back the loan on time, including interest. In the case of a collateralized loan, like for a car or house, then the bank can potentially seize the collateral if the borrower defaults on the loan. I would dispute that the borrower is "at the mercy" of the bank, because the loan contract is set at the time the loan is taken. The borrower does have to follow through with their part of the contract though, even if it was a bad deal. I am unclear how the borrower is at the mercy of the seller-- the seller has gotten the price of whatever it's selling (either from the bank directly or from the borrower) and then is out of the picture.

Now let's up the ante and make things even more difficult for our "purchaser" by introducing a fourth-party: the Government who demands taxes from every transaction.

This seems irrelevant with respect to the loan because the borrower would have to pay the tax on the purchase anyhow, as well as any additional earnings the borrower might accrue. The government also has expenses which would require the money to continue moving, although the government can destroy money. I think we can avoid any talk about special cases like tax-deductible purchases made with the loan or anything similar, which seems irrelevant to the general concepts we're talking about.

As the money scatters, each party will negotiate a different price based on their needs/wants, and the "purchaser" may lose a little negotiating power because of the pressure to pay on time. So far, only the Government has received money for nothing, after taxing the "seller" on the very first transaction since the introduction of "money".

I'm not sure I follow this. Each party (I assume this is still the bank and borrower, and possibly the government, as the seller's involvement seems finished) negotiates the price(s) of...? Is it labor, time, effort, anything that might be grouped under a term like "earning power", where money is distributed to individuals and groups through a non-loan channel?

The "purchaser" tries to work/trade with both the "seller" and Government for all the money they have, but the "purchaser" is taxed every time (oh, what fun). Even if the "purchaser" gets back every bit of money that was put into circulation, it is only enough to cover the principle but not the interest to the "bank". The "bank" could spend some of the money it receives until eventually the "purchaser" finally makes good on its promise and becomes debt free. Now the "bank" has become a member of the money for nothing club.

I'm assuming that the first line refers to work the purchaser does for the seller or government in order to receive income. Regardless, this gets at a point I tried to make earlier. The purchaser doesn't need to collect earnings from the money distributed by the bank as a loan because there already exists money in the economy. From past loans which have been satisfied, from Treasury vehicles, whatever.

So if we imagine that, instead of making a purchase, the purchaser took out a personal loan from the bank at interest that is assessed immediately (so the principal and interest are owed the moment the loan is disbursed), and used that loan to immediately pay against the loan, it would cover the principal and leave the interest as you've said. But the purchaser can then go to work, get paid money that was never involved in that loan (or possibly, any loan), and use that money to pay the interest. The bank does increase the amount of money that exists when it operates as above, but active bank loans are not the only source of money in the economy.

I would dispute that the government has gotten money for nothing but will grant that it receives tax revenue from transactions in which it doesn't have any direct involvement. It's not strictly correct to say that the bank has gotten money for nothing because it does run the risk of the borrower defaulting on the loan. The bank also gives up the opportunity to do something else with the money (this is the bank's opportunity cost of making a given loan) which may be more profitable. There are also costs associated with assessing, preparing, issuing, monitoring, and servicing loans. But banks employ swarms of actuaries and analysts whose sole function is to manage such risks, and they wouldn't be in the business of issuing loans if it weren't profitable.

Suppose the "bank" didn't want to spend any of the money it received, then there wouldn't be enough money available in circulation for our borrower the "purchaser" to pay the interest with. The "bank" could let the "purchaser" default on the loan but the borrower has nothing the "bank" wants and besides, the "bank" enjoys being on the something for nothing circuit and so prefers the "purchaser" keep working. The "bank" can lend the money to somebody else at interest, but this only creates a bigger debt until the "bank" starts spending some of its money.

The bank still has employees to pay, maintenance on its buildings and systems, dividends to pay to shareholders, and on and on. As a functioning business a bank doesn't have the option of hoarding 100% of its money 100% of the time. To the extent that a bank (or any person or group) does hoard money there is a problem. But that problem is unrelated to loans: imagine if the bank refused to issue any new loans but instead offered savings accounts with fees for holding an account (and the bank offers no other services). If the bank hoarded the fee money, it would effectively be removed from the economy for as long as the hoarding behavior went on. Or Doctor Scrooge McGalt, who single-handedly invents an amazing product, makes a ton of money (exclusively from the outstanding money supply, no bank or debt is ever involved), and then inters that money in his private vault and never spends any of it, ever. It's the exact same problem for the money supply.

The "bank" has no choice but to inflate the money supply, so it "creates" new money.

Of course it has a choice, in that it can decline to issue loans which outstrip the money on hand. Banks don't even have to be in the consumer loan business, though obviously many are. It's profitable but fundamentally expansionary when leveraged.

You may have noticed, this puts the "bank" in a very powerful position. Not only does the Government receive money for nothing, but now the "bank" has jumped on the something for nothingtrain/wagon. No matter which bank you go to, with power to create "credit" being out of your hands, the stage is set.

You can definitely create credit, but good luck finding someone who will accept it in lieu of cash. You definitely cannot create money, which is not the same as credit. Not legally, at any rate. You also have the choice to avoid applying for a bank loan altogether-- consumers also have agency.

Now if borrowers were savvy, they might realize that the debt ought to be less than the sum of that "created" money, as after all, "Who are the banks to expect so much in return for literally nothing?".

A savvy borrower might question the belief that all money in the economy comes from currently active loans. Or provide some evidence for why he or she believes that to be so.

Is there a better system? It's never about the system. It's about people and how they treat each other. I could recommend one impartial-objective system after another, and every single one could either succeed or fail based on how people treat each other.

So can your whole position be satisfied if the system remains exactly as it is, but people treat each other better? If so, why have you decided to propose a different system rather than try to improve people's treatment of each other? On a second reading I see that this might come off as sarcastic, but it isn't meant to be. I'm really asking: why would an alternative system ensure better behavior, and why would changing to that system be better than trying to improve behavior right now?

This is an ideal time for civilization introspection. Don't waste it.

Sure. Let's try this a different way. Here are some things which would support what you are arguing and maybe change some minds:

1. Do you have any measurements or estimates regarding the current (or typical) balance of outstanding loans not secured by collateral which show that balance to be greater than the existing supply of money? You can drop the collateral condition, if you like. I included it because debt backed by collateral isn't exactly the same as other debt, but I'll take a general picture over nothing.

2. Could you supply a reason why you believe that the only money that exists in the economy is involved in active loans at any given time?

3. Do you have any evidence of banks in general hoarding money, as an ongoing policy? Either way, why might a bank do so?

4. Are you referring only to banks regulated by the Federal Reserve, and if so, do your views change at all for those banks which are regulated directly by a government agency like the FDIC?

5. Do you have any evidence that the interest on loans issued by banks outstrips expansion of the money supply from all other channels?

6. Do you have any argumentation supporting the idea that assessing interest on making money available to another (like a bank loan, or on the other side on the balance in a savings account at a bank)?

7. You've talked about deflation before and it seems a key feature of why you say the system is unstable. Can you offer any deflationary mechanisms in the processes we've discussed other than sustained hoarding?

This isn't a list of things that I'm demanding you provide. But if you satisfied all seven it would go a long, long way towards convincing me. Maybe all the way. If you satisfy none, or very few, of them, then it will remain difficult for me to see how your conclusion can be both consistent with the world and completely accurate. If these questions, at least, cannot be resolved, why should someone accept your conclusion other than your assertion that it simply is perfectly correct?

On the other hand, what (if any) things would, if true, convince you that your position is incorrect or incomplete?

1. Do you have any measurements or estimates regarding the current (or typical) balance of outstanding loans not secured by collateral which show that balance to be greater than the existing supply of money? You can drop the collateral condition, if you like. I included it because debt backed by collateral isn't exactly the same as other debt, but I'll take a general picture over nothing.

If you like charts, be my guest.

2. Could you supply a reason why you believe that the only money that exists in the economy is involved in active loans at any given time?

Forget the word "active". Money is created and issued at interest, it doesn't matter if it is reused after shareholders receive it, it is ill-gotten. Relending created money at interest only compounds the original sin.

3. Do you have any evidence of banks in general hoarding money, as an ongoing policy? Either way, why might a bank do so?

They are receiving money 'they' originally created. Shareholders may occasionally donate money (easy to do when it was money for nothing). When they do spend money, they are shopping in a different league, spending a vast amount of that "hard earned" money in comparison to what the average person might spend, the recipient of which tends to be other wealthy people (trickle-down economics is a misnomer). When they are not spending money, they are investing it, for the express purpose of making profits (i.e. getting more in return, not letting any of it go) based on the originally created money.

4. Are you referring only to banks regulated by the Federal Reserve, and if so, do your views change at all for those banks which are regulated directly by a government agency like the FDIC?

I'm referring to all banks under a Central Bank, and all Central Banks under International Central Banks.

5. Do you have any evidence that the interest on loans issued by banks outstrips expansion of the money supply from all other channels?

I'm confused. The money supply is expanded, debt on the money supply is also expanding. If the money supply is not expanded, debt still expands.

6. Do you have any argumentation supporting the idea that assessing interest on making money available to another (like a bank loan, or on the other side on the balance in a savings account at a bank)?

I'm confused.

7. You've talked about deflation before and it seems a key feature of why you say the system is unstable. Can you offer any deflationary mechanisms in the processes we've discussed other than sustained hoarding?

Population growth. The "need" to perpetually make a profit. Rising prices. Redundancy.

So can your whole position be satisfied if the system remains exactly as it is, but people treat each other better? If so, why have you decided to propose a different system rather than try to improve people's treatment of each other? On a second reading I see that this might come off as sarcastic, but it isn't meant to be. I'm really asking: why would an alternative system ensure better behavior, and why would changing to that system be better than trying to improve behavior right now?

It might be too late. People have allowed the "system" to guide their behavior, for too long. I do not see any Governments with contingency plans, instead, they are trying to restart the existing failed system. But what else am I to expect? "People ARE the Government". When the public doesn't spare a thought and continue to automatically "blame" the Government, progress is seldom, if ever, made.

The only purpose of step 1 is to see debt/inflation for what it is and establish a buffer to delay any collapse. If there is a collapse, skip step 2 as it won't be able to sustain mass unemployment and go directly to establishing a civic credit system in every department of every State.

-

The purchaser doesn't need to collect earnings from the money distributed by the bank as a loan because there already exists money in the economy.

You have fast-forwarded. The example starts with the first loan of money to illustrate a point.

The bank still has employees to pay, maintenance on its buildings and systems, dividends to pay to shareholders, and on and on. As a functioning business a bank doesn't have the option of hoarding 100% of its money 100% of the time.

It's good that you are extrapolating from the example, but for simplicity, assume the "bank" is one person and no building.

As the money scatters, each party will negotiate a different price based on their needs/wants, and the "purchaser" may lose a little negotiating power because of the pressure to pay on time. So far, only the Government has received money for nothing, after taxing the "seller" on the very first transaction since the introduction of "money".

I'm not sure I follow this. Each party (I assume this is still the bank and borrower, and possibly the government, as the seller's involvement seems finished) negotiates the price(s) of...? Is it labor, time, effort, anything that might be grouped under a term like "earning power", where money is distributed to individuals and groups through a non-loan channel?

In the example, only the "seller" and the "government" has any money in circulation. The "purchaser" needs that money to pay back the "bank" on time or risk losing what was purchased. Both the "seller" and the Government have negotiating power because they have what the "purchaser" needs. I'm trying to illustrate what a "poor" position the "purchaser" has put itself in.

The "bank" has no choice but to inflate the money supply, so it "creates" new money.

Of course it has a choice...

Staying with the example, if the "bank" can't yet decide what to spend the money on, and doesn't want borrowers to eventually default, to avoid stalling the economy, Government intervention and risk losing being a member of the money for nothing club, the "bank" must invent money.

You may have noticed, this puts the "bank" in a very powerful position. Not only does the Government receive money for nothing, but now the "bank" has jumped on the something for nothing train/wagon. No matter which bank you go to, with power to create "credit" being out of your hands, the stage is set.

You can definitely create credit, but good luck finding someone who will accept it in lieu of cash.

I guess I'm not making myself clear. The bank needs the borrower to create credit, but the borrower is letting the bank take full command i.e. the power is out of borrower's hands and the stage is set for the bank do as it pleases.

A savvy borrower might question the belief that all money in the economy comes from currently active loans.

Still looking for a way to pardon the banks, eh?

Or provide some evidence for why he or she believes that to be so.

Access to confidential documents is not as simple as some people believe.

Which reminds me...

Ah yes, the classic conspiracy theory circular reference.
"Have you any evidence for this?"
"Of course not, the lack of evidence proves a cover up!"

Did you ever find those confidential documents that are so easy to obtain?

On the other hand, what (if any) things would, if true, convince you that your position is incorrect or incomplete?

If I were to suddenly suffer from memory loss.

Ah yes, the classic conspiracy theory circular reference.
"Have you any evidence for this?"
"Of course not, the lack of evidence proves a cover up!"

Did you ever find those confidential documents that are so easy to obtain?

If I were to suddenly suffer from memory loss.

Ah yes, the classic conspiracy theory circular reference.
"Have you any evidence for this?"
"Of course not, the lack of evidence proves a cover up!"

Did you ever find those confidential documents that are so easy to obtain?

Ummm, yes.
If you pay attention to the news, you might have heard of them.

You've given me links to Wikipedia pages. None of which cover the main point of the topic.

If I were to suddenly suffer from memory loss.

So, in other words, you are a zealot and no amount of evidence will make you change your mind.

You don't have any evidence, and any you find will only confirm what I'm trying to explain.

You've given me links to Wikipedia pages. None of which cover the main point of the topic.

I gave you examples of leaks of confidential documents. But keep shifting those goal posts....

You don't have any evidence, and any you find will only confirm what I'm trying to explain.

I don't need evidence. The burden of proof is on the person making the unsubstantiated claim.