Topic: Hidden Secrets of Money (Read 6724 times)

I don't know about the legal issue.  But this is how it works as an operational issue

At the individual bank level: banks make loans.  They then either borrow the reserves they need at the discount window or overnight market, OR the grow their deposit base to meet their reserve requirements. But the banks make the loans first, and then do whatever to hit their reserve target at the end of the day in order to balance their books.

At a macro level: the banking system makes loans, which in turn create deposits.

You have to look at banking as a balance sheet operation to understand it.

Technically speaking when a bank takes your deposit and pay you interest i.e interest savings or CDs.  You are lending them the money.  That money becomes part of their reserves that they lend from.

For checking account I'm not sure. 

If I am interpreting you correctly, you are saying that banks are illegally loaning consumer deposits, right?

FDIC insurance is only for bank failures.

If the bank wants to loan out your money, they need your permission because a deposit is not property; it is a debt owed to the depositor.

In order to understand past and present Law, you must first understand the British and American definitions of words used and based in common law prior to 1900.

One of the most accurate sources is the Dictionary of Law consisting of Judicial Definitions and Explanations of Words, Phrases and Maxims.

https://archive.org/details/cu31924022836534

Therein you will find defined the word "deposit" just as I have described.

That can't be true. How would a savings bank make money? Why would there be FDIC insurance? Do you have a source to back up that statement?

Govt doesn't guarantee value.   They back the money as the issuer.   They accept it as legal tender.  Its the only accepted tender for taxes.   Which is legal obligation.   The taxes guarantees demand.   

When banks create loan the deposit is created simultaneuously as a balance sheet entry.   Asset & liability

Actually, banks are prohibited from using consumer deposits to make loans.

Government is also part of society.   Government plays an important role to keep society stable.   Anarchists down play government but when shit hits the fan they all go running to government

In principle all those scams depend on people's belief: They believe that the government will guarantee fiat money's value, then fiat money will keep their value. They believe that banks will protect their money, then they hand over money to banks. In fact the government can not guarantee anything in return for fiat money, except accept it as a tax payment, and banks just loaned out those money to someone else

Oh, I misunderstood your question. Actually, I don't think any of those things are Ponzi schemes. I think that all fiat money systems run by central banks are simply stealing the people's money.

Well I understand a definition of Ponzi - this is why I asked this question.
If someone tells me that money, economy, bitcoin and perhaps a bank account are ponzi
Maybe I did misunderstood a meaning of main topic?
But I think there is nothing from Ponzi scheme here. in this what was called a ponzi above.

Read the definition of a Ponzi scheme here.

What is a ponzi? all economics? money?

The ponzi will last as long as exponential growth is possible with finite resources and the allotted environmental space allows.
Just hope it's natural disaster that triggers reform not ego, and war.

What you are talking about is base money, it is real money and spendable. Do not mix it up with checkbook money, which is just a number on your account.

You deposit 100 dollars into a bank, then bank loaned out 90 dollars to other people and keep 10 dollars. Your account statement still shows that you have 100 dollars in your bank account, but 90% of those dollars are illusion and can not be spent by you (Double spend is not possible). When you withdraw those 100 dollars, banks will have to find another 90 dollars to give you

In reality there are many different type of accounts, money in most liquid accounts might not get loaned out by banks, but money in those long term saving accounts definitely get loaned out

Mike Maloney's "Hidden Secrets of money" ep6 will be about Bitcoin.

https://www.youtube.com/watch?v=iFDe5kUUyT0&feature=youtu.be (see comments)

Absolutely right! If you don't own a wheelbarrow, better get one right away. You'll need one to carry enough fiat currency to buy a loaf of bread.

Even with so called tapering, or totally removing QE, the govenment could continue money productions in the semi private bond market. For instance, the USPS could issue a bond with implicit government insurance, or through a newly created empty company. This is what happened to the Reichsmark.

Edit: http://en.wikipedia.org/wiki/Reichsmark
"Dummy Company Currency Expansion"

When the Federal Reserve buys a U.S. Treasury bond, it credits the U.S. Treasury with new money, created out of thin air. The only collateral is "the good faith and credit of the U.S. Government." The Treasury can spend that money, illusory or not, for real goods and services. It does this over and over again, thus causing inflation, a hidden tax on everyone who holds dollars.

When YOU get a loan, is the bank your creditor? What collateral is involved? If banks are depositing your promissory note for value when you sign a mortgage, who exactly is brokering that transaction?

It is an illusion of money, like after you deposite your money at MTGOX, the web interface shows you a number on your account, and you think that money is real  

A larger amount of checkbook numbers is money.

FRB does not create money, it just created larger amount of checkbook numbers in bank's account, prove that money has been stored there, but those numbers can not be spent, if there is a bank run, those numbers will vanish quickly. The base money will never increase by means of FRB

What's the difference?  A loan is a loan and you said "every new loan must be collateralized."  Every loan doesn't have to be collateralized (I don't care what you're talking about) every loan needs to weigh risk (interest rate) along with the borrower(s) ability to repay.  That's no different for a government or any individual.

So it was the plan from the beginning. Also next time? Print redeemable bills, print like crazy, the cancel redemption, because else all our gold could be gone? Maybe the swiss should have a go on it next time. Or maybe the scam will be seen through, and bitcoin will be fully implemented instead. We can hope.

...

In partial defense of Nixon in 1971 (?!), if he had NOT stopped France et al from taking our gold at that price ($42.22 / oz IIRC), then ALL of our gold would be GONE!

I'm a FOFOA fan (but not FOFOA, duh..., smile,,,).  He came up with an idea that if the Treasury just put out the call that they would buy any and all gold for an arbitrarily high price (say $10,000 / oz) that would instantly set a worldwide floor of that price, and pretty soon gold would rise even higher.  Bang!

FOFOA is the guy who made the "$55,000 / oz" idea famous in the Au Community.  He writes dense stuff, but if you follow gold, this is excellent reading, highly recommended:

fofoa.blogspot.com

Shire Silver... which I also am the owner of a few of.  

Exactly, which is why I made Shire Silver, credit card sized units with small amounts of gold and silver in them. They make gold and silver as easy to use as the paper notes, so you don't need the paper in the first place.

But yeah, bitcoin has certainly made a strong case for being the primary digital currency, with physical currency like mine being relegated to physical exchanges.

This is my opinion:

• Does it really work as the video claims it to be?

Yes, the concepts exposed in the video are sound (it is a simplification, of course).   

• Does the same yield for the Euro or Yen for example?

Not so different.

• Would a gold standard really solve all our problems, or would it create others?

*All* our problems? Absolutely, no. The question is different: do you want an economy based on a fiat system monopoly imposed by law and managed by few private corps?

• Why would a sovereign country give the right to make money to a private corporation with stockholders, so that they can collect interest? They could just do it themselves without having to pay interest.

Ehm, long story... Anyway, many "public" services are managed by private corps. Interest is necessary to discern good and bad investments. Unfortunately, in this system debts can be easily monetized/socialized: the rule is private profits, public debts.

• Does it really only work if the system collapses every 150 years or so, which would be the logical future as pictured by the video?

Any human creation has an explicit or implicit expiration date, why a monetary system should be different? The real problem is the damage produced by a wrong imposed monetary system: it boost bad investments, misallocation of resources and corruption.

• If the current system only works if new debt is created to pay the interest on the principle, why aren't a lot of economists rebelling against it?

No economist can find a job if the fiat currency system collapse: they are part of the pyramid but in a better position than you.
[/list]

Do you see the pyramid created by the fiat system?

Absolutely! Something like Bitcoin would be a much better standard. Then the greedy politicians would not be able to inflate it.

Don't you think that it's time for changes as Bretton Woods system has outlived its usefulness ? it's time for a new standart

Nowadays, newly printet money that resides in the mint or in the central bank, does no harm, even better if people don't know about them.

The idea of the traditional gold standard, is that bills are backed and redeemable, so, just like not yet distributed coins, with the gold in the banks and the same amount of redeemable bills in the market, it should be fine, just as good as the gold, if distributed.

Now here is the problem. Printing just a little more bills than there is gold, works fine, because most redeemable bills will not be redeemed. Then you can print even more, just a little. Only after some time, maybe decennia, the public will suspect that there is not enough gold to redeem.

At that point, the redeemability will be cancelled. Then we are at it again, with uncontrolled fiat.

So there is int the end no other choice, with gold, than to use gold directly as money. This is perfectly implementable today, with plastic coins or cards that contain fractions of grams of gold. You could also have redeemable bills, but they have to be privately issued with no government guarantee, so a suitable frequency of bank runs can keep the people alert and the issuers in check. The same goes for deposits for electronic payments.

Bitcoin changes all this.

I remember that.   But elasticity from removing gold standard allowed Friedman to use monetary policies to address stagflation.

Thanks for sharing your thoughts and this link.
It was very interesting to hear and to read.
Now I can go to sleep and think about this during lying in a bed...

I must say - there are things on this world that I cannot imagine why it is like it is.

After the Nixon shock in 1970, the U.S. Economy was stagnant until the early 1980's. A common phrase in the mid 1970's was "stagflation".

What about economic growth after Nixon shock?

usury by design is against nature's law where money is created from money

default is the only balancing in that regard so the power of who may default and who may not is quite the key to the kingdom


if you have paid attention to the financial mess the last 7 years you will see much debate lies on who and how they default

In 1944, at the Bretton Woods conference, 44 countries met and agreed that they would all peg their currencies to the U.S. Dollar, and that the U.S. Dollar would be pegged to gold. In 1991, President Richard Nixon unilaterally removed gold backing to U.S. Currency.

Look what happened to the price per ounce of candy and the price of a First Class Postage stamp up to 1970 and after 1970 on this chart. Inflation, inflation and more inflation!

Just curious.  Have you read Lights in the Tunnel?  http://www.amazon.com/Lights-Tunnel-Automation-Accelerating-Technology/dp/1448659817/ref=sr_1_1?s=books&ie=UTF8&qid=1396045622&sr=1-1&keywords=lights+in+the+tunnel

Its similar to what you are concerned about?  Great book

gold backed currency would not solve anything... most people who promote gold own gold, just like bitcoin, and they'd love to see a gold standard because they'd stand to 'gain' from it... they are profit mongers.

Gold would be fractional reserved like any other currency and would not meet the needs of 21st century commerce. Gold is a commodity.

It remains to be seen if credit based currency issued by the government treasury would really work that much better than debt based currency issued by a central bank.  The main problem we have to day are exchange rate differences and automation which has eliminated a lot of jobs and lowered their salaries. Just in the last 10 years where I work machines are able to pump out twice the product or more in just 10 years... what can't be made faster with automation is shipped to china to get done.

There is a lot of confusion of interest. Do you think the money volume must increase because of interest?

That is far from the truth. Interest is paid from one person to another person. It does not create money, nor destroy them.

The lender delays his consumption, so the loaner can consume before he has otherwise earned his money. The lender gets conpensation for the delay as interest. The loaner has to pay for the privilege of advancing in the queue for consumption. That is all.

The rate of interest is the value the loaner puts on the right to consume early. The lender puts a value on the disadvantage of the delay. The price (the interest) is resolved in the market.

There is a vast difference of this time preference among different actors. It depends of all circumstances they find themselves in. Some just wants or needs to consume now, whether he has earned or not. This is often rational. Think of a capable person with no savings, who suddenly finds himself in a family with wife and child. Others can delay their consumption, often indefinately, transferring their debt holdings through generations.

Of course nowadays these simple facts are hidden, since money is created in droves in the form of notes and credit, and the interest rate is held artificially low, using that new money to manipulate the market.

No I don't. Now you are just being absurd/stupid/trolling. I wrote that your "new monetary units" are not necessary.

This discussion is about how banks create money, not private lending.

Nope, uncollateralized loans are made all the time.  Large companies can get loans without collateral based on cash flow alone.  High net worth individuals can also serve as guarantors in lieu of collateral.

You seem to think that selling a self replenishing resource magically invents new monetary units, as the self replenishing magic rubs off on the money system. It does not.

Neither of those books will tell you how money is actually created.
Every new loan must be collateralized by something, so where is this collateral being held?
Did those authors tell you it is held at the DTC? Did they tell you how to get that collateral back and liquidate the bonds that were written against it?

The people's credit pays for everything in this country; the State is bankrupt and beholden to its creditors, and it has made a fiction out of each person with an SSN in order to operate in corporate receivership with respect to your assets.

My Birth Certificate is from the USSR and it has my Christian name (Father, Son, Holy Spirit). When it was translated and apostilled, my name was transposed in order to create a fictitious entity (Jewish name) so that I may participate in the American SSN bankruptcy insurance underwriting system.

Queen Elizabeth controls and has amended Social Security; additionally, every branch of State and government is a registered business
Source
Moar reading

Declaring independence does not revoke the charter and it does NOT give you title to the land; this means that the Crown still has allodial title to the land.
A people declaring independence from one government/system are most likely just going to be moving into a bigger cage.



If you want to understand the money system, it is a LONG trek full of surprising info and you first need to understand history; actually, the system itself is not as important as picking the lock of your cage; here are your guideposts:
David Merril ("lawful money")
Patrick Devine ("We The People Shareholders")
The Informer

Good luck.

Gee, I wonder how a fisherman could possibly pay off a mortgage then. You misinterpreted my analogy in two ways, so i will be explicit:

This and other videos claim that since interest must be paid with dollars and dollars are debt that there can never be enough money to pay to both interest and debt. My claim is that this is wrong because the results of production (fish in my example) can be exchanged for dollars, which can then be used to pay the interest. Additional debt is not needed to pay the interest. This works as long as production is greater than the interest, even if all assets are bought with debt.

(just in case anyone else is confused, bank loans or government bonds are definitely not repayable in fish, hence fish only absorbs loan interest from informal debts)

I catch fish and exchange my fish for currency and pay the interest. I am effectively paying the interest with fish, and I don't have to issue more currency to pay the interest. As long as I can catch enough fish to pay the interest, the debt does not grow and there is no need to issue more currency.


The amount of dollars represents the amount of debt (ignoring the other Fed assets), so there will be no debt left over.


The system is doomed if production can't keep up. If/when interest rates return to historical levels, we are doomed.

Inflation causes economic problems. It is a poor method of taxation. Anyway, if a government must go continually go deeper into debt then it is spending too much.


Increased spending is not the ultimate goal. You could easily increase spending by giving each person $1 trillion, but in the end that will accomplish nothing except for creating massive inflation


You can't keep prices stable and have inflation. That's a contradiction.

What is wrong about the FRB part?

From what I'm reading, bank lending creates deposits, and the limit on amount of new money is the willingness from others to borrow it.
The problem of this system is that in case of the federal reserve, privately owned banks earn money on creating money out of nothing.
Other countries often own their central banks, and get dividend. These countries earn money by making new money, getting hidden tax by creating inflation,
and getting normal taxes.
I'm going to throw some new thoughts about this here.

• To run a wealthy country, a lot of money is needed (national debt is a result of that). People are willing to pay only so much taxes.
  Without inflation (hidden taxes) it wouldn't be possible without turmoil.
• Inflation is good for the economy, because it promotes spending.
• Policy to keep the prices stable is needed because that's a good characteristic of money. A gold standard couldn't do this, because of the fixed supply.

Can you explain what you mean with interest can be paid with production. Don't use the fish example, because I can't use fish to pay loans at my bank, nor can a government.

The dept can only be paid with dollars. And dollars bear interest. When all dollars are used to extinguish dept, still dept exists.
The system will be doomed because production or real economy can never keep up with creating new dept.

Does that include the time before the federal reserve system?

There are two excellent books that describe the history of the central bankers of Europe and how they loaned money to the various governments, and how they played one government against another by financing wars, often financing both sides -- profiting from both.

The first book is a short, quick read at only 136 pages. It is: "None Dare Call It Conspiracy"
The second book provides much more detail and is 588 pages, but still very readable. It is  "The Creature From Jekyll Island"

By playing one government against the other, these central bankers controlled the major governments of Europe. The United States resisted getting involved with central bankers for a great part of its first 120 years or so, during its greatest period of economic growth in history. Large bankers got together in a secret meeting at Jekyll Island, Georgia in 1910 to devise a plan to create a cartel controlling the central banking function for the United States. These bankers represented the Rockefellers, J.P. Morgan, and the Rothschilds and Warbugs of Europe. Also in attendance were the U.S. Secretary of the Treasury and Senator Nelson W. Aldrich, father-in-law to John D. Rockefeller, Jr. and grandfather to Nelson Aldrich Rockefeller (future Governor of New York and Vice Presidential Candidate). They were unable to get their plan passed by Congress in 1910. The American people were opposed to a central bank, and the Congress would not pass the plan into law. Only after disguising the plan by making no reference to being a bank, and using the name "Federal Reserve" were they able to get Congress to pass it in 1913. Its stated goals were not its real goals, and the Federal Reserve has never accomplished its stated goals in its history. Its real goal was profit for the central bankers and control over the government leaders.

Bottom line: the Federal Reserve, along with the European central banks, is a vehicle for the central bankers to get control over each of the governments. A strong case is made in both of these books for the argument that these central bankers desire to consolidate all the world's government into one worldwide government that they control.
 

btc can hidden money

I agree with odolvlobo explanation.

I think many people confuse private debt and govt debt.   They are not the same thing.

Private sector needs debt to engage in business in order to profit.  Govts don't need to profit.   Heck they have power to print money.   Govt role is to keep the economy going.   

Whether deficits matter or not in the long run is debatable.   Japan runs a deficit 300% of GDP and it hasn't collapsed yet.

 

Have you guys seen "The Money Masters"? Very interesting documentary on the history of the USD

All these borrowing and IOU things have a common paradox: One can not lend out something that does not belong to him (That would be crime). So before the FED lend out money to the government, it must have the ownership of those money at the first place. This means that every dollar belongs to FED at the moment they were created. It also means that FED are exempt from the interest burden since they never need to pay it to anyone

Most of the video (except the FRB part) is correct

The ultimate question is: Who get the ownership of originally created base money, and what have they done for gaining this ownership?

Under a gold standard, money is created by gold mining, which is no different than any other type of work in society, that gives money fair value. But after US removed gold standard, money is created and owned by FED who is doing nothing. So, in principle the fiat money should worth nothing because there is no production cost, but they are still used to purchase things because other people are accepting them. This lead to the result that those who are creating money out of nothing can legally claim other people's work without doing anything

Everything is wrong. But we are too busy to stop and think about why all these happens.

Just gonna leave this here. interesting to see a newspaper like the guardian reporting on this....

http://www.theguardian.com/commentisfree/2014/mar/18/truth-money-iou-bank-of-england-austerity

The problem is that for every seller, you need a buyer.  Now back in the 40's during WW2, debt was owned nearly 100% by US citizens (via war bonds).  That's no longer the case with China and Japan owning a significant amount.  So essentially you need to look at outside parties in order to sell any significant amount or try to inflate the debt away.

Please watch this video:

http://www.youtube.com/watch?v=04MPZgyhG5s

The other day I saw this video.
And I came across many more videos saying more or less the same.
It is very clear that the people behind such videos are against the current system.
That makes the message that they are spreading and explaining a bit colored.
Now, I'm not an economist. I really don't know how much of it is true (maybe all, I don't know).
I'm hoping that there are people roaming these forums that have more understanding of the subject, and would take some time to explain some stuff.
Because I'm thinking that every system has its flaws, but our current system can't be all bad, right?
I suspect some nuances can be made regarding this subject.

Here are some questions that I have about this video:

• Does it really work as the video claims it to be?

yes, it does.

• Does the same yield for the Euro or Yen for example?

yes it does, there are no longer any national currencies that are not created by the debt system described in the video.

• Would a gold standard really solve all our problems, or would it create others?

gold would prevent the banks from printing money, it won't solve all our problems but it will improve the situation.

• Why would a sovereign country give the right to make money to a private corporation with stockholders, so that they can collect interest? They could just do it themselves without having to pay interest.

the bankers convinced the american government that its the right thing to do back in 1913 when the federal reserve was established.

• Does it really only work if the system collapses every 150 years or so, which would be the logical future as pictured by the video?

it never works for a long time. there is no example in history of paper money surviving it has always failed eventually. in comparison gold coins used by the romans more than 2000 years ago still have value today.

• If the current system only works if new debt is created to pay the interest on the principle, why aren't a lot of economists rebelling against it?

Alot of economists do rebel against it. unfortunately economists are not in control of banks nor government. the current system enriches the banks and the government at the expense of the general population and so they have a strong incentive to keep the system as it is.

Assuming the U.S. tax base is productive enough, the 1% interest can be paid from production. It does not have to be paid though additional borrowing.


I assume you are referring to the problem that if all U.S. debt is paid back, there would be no more dollars. That is only a problem if the new borrower's debt and interest must be paid with dollars, and that problem exists with any currency -- even a gold-backed dollars, since no dollars would exist that could be bought with gold.


I agree with you about the value of a gold-backed currency, but you lost me here. How does this relate to the belief that the principle plus interest exceeds the money supply and therefore can't be paid off?

Your logic is circular. How can the fed extinguish it's liability with someone else's liability(US government)?

Let's use a simple example.

Fed loans US gov 1bil + 1% interest.

The US gov now has 1bil. Where does it get the 1% interest portion from to repay the debt? It has to be created first via someone else borrowing it into existence.

Now the US gov repays the fed, but what about the new borrower? Where do they get the funds from to repay their debt + interest.

Every new loan must be collateralized by something, hence if the economy does not expand fast enough to create new assets as collateral we get credit inflation. Existing assets must be artificially revalued higher in order to support new debt. Think of home prices, the underlying value of the home never changed. If you read the original Fed Reserve act, holding US government bonds was illegal. The fed could only lend against SHORT TERM self liquidating bills from the private sector. Ie The fisherman's IOU's would be the collateral for new fed credit. This was changed when they ammended the fed reserve act in the 1930's. Banks got in bed with the government and slowly Tier 1 capital assets became government bonds.

Gold's role was to extinguish debt. I bring a bank note(LIABILITY) and exchange it for Gold(Asset). Do you see the difference with your example? I am not extinguishing 1 form of debt(liability) with someone elses. Money is anything that extinguishes debt. It does not have to be gold, however ONLY production can repay debt. Everything else is merely a form of credit. We do not have "money" present in our system, it was removed in 1971.

A healthy bank backed its deposits by 2 things. Gold and real bills(self liquidating credit which matured into gold). This required trust, now trust requires prudence which is a virtue. You had to be sure the fisherman would make good. The economy could be expanded to the extent of your prudence. This is a functioning free market system. Money is backed by the productive capacity of your economy. We have nothing of the sort today, hence the boom(counterfeit credit) and bust nature of our system.

The reasoning behind gold was simple. Gold was and is the most saleabile ie liquid asset. You could get rid of large volumes of it without depressing the bid side. Real bills were the second most liquid credit instruments, since they matured in gold and were backed by real production.

http://research.stlouisfed.org/fred2/series/TCMDO

Basically they do not want this to stop. Ever.

I don't accept your concept of non-liquidating debt.

I don't see why the current debt cannot be extinguished. The Fed has a balance sheet, and debt (the Fed's liabilities) can be extinguished by trading it for its assets. For example, if the Fed wants to remove $1 million from the money supply it simply sells or redeems $1 million worth of assets (bonds) and the dollars that it receives are gone.

There are 2 types of credit. Self liquidating and none liquidating. You are describing self liquidating credit, where the fisherman's IOU's get extinguished when he delivers the fish. This type of credit is usually short term, and has specific terms outlined for its repayment. This is also referred to as real bills, discount bills etc. Notice how in this scenario only a producer can issue IOU's because only a producer is capable of extinguishing them(repaying).

The present financial system is made up of entirely credit that cannot be liquidated. The dollar is a debt instrument that has no terms outlined in its redemption. This means it cannot be extinguished. New debt MUST be created to repay old debt under this mechanism. Eventually the system implodes as we have come close to in 2008. None liquidating debt must DEFAULT. The question is just when.

What the US federal reserve is doing is equivalent to check kiting. They are crediting government accounts via QE with money that does not exist. Imagine buying stuff with bad checks. Every fed reserve dollar is backed by a US gov bond which specifies repayment in those exact dollars that are being lent. Do you see the circular problem here? Commercial banks do the exact same thing. Every dollar they lend, requires more borrowing to make up for the interest. This system requires perpetual debt creation(which is impossible) to continue functioning. Since every loan must be collateralized by something, it requires a constantly "expanding" economy. Modern economists believe an economy can grow at the same rate or faster then COMPOUNDING debt. Hence 2% GDP growth every year is compound growth. Anyone with a calculator knows this is impossible. As real assets do not grow as fast as compound debt, we get inflation from more counterfeit credit chasing fewer goods. Inflation in modern terms is the expansion of counterfeit credit.

The entire role of gold was not "price stability" which is not desired, but interest rate stability. The gold standard tended to have a low and stable interest rate. The other important aspect of gold was its ability to extinguish debt. Under the fiat system we have had interest rates go well into double digits, and back down again. This has caused immense bond speculation, and enormous damage to capital of financial institutions(insolvency).

I think what he means is that the debt has two tiers, one at the issuance level and another at the level of economic actors. Your scenario takes place at the level of the economic actors, where debts and/or the interest on them can indeed be repaid in kind. The government is liable for the debt created at the issuance level (sovereign bonds), and both principle and interest can only be repaid in the currency they were issued in (not including fish).

First of all, thank for all the replies. Not everybody agrees with each other.
I hope we can come at some fundamentally objective understanding of the subject.

The federal reserve creates checks that the banks get in return for bonds.
At that moment new money is created. But the checks aren't backed by anything,
whereas in the days of the gold standard it was backed by gold.
The federal reserve asks interest, so essentially they earn money without risking anything.
With the gold standard they couldn't increase the money supply without boundaries.
Can they do that now? Is making it bigger good for them, what feed back mechanism is in place to control it?

Another two questions about the debt paradox.

• Does the example of odolvlobo represent the actual situation?
• Is debt already larger than all money in existence? I.e., is the system already doomed to collapse?

Why does interest have to be paid at all if the debt is based off the produce of the same people the money is supposed to go to?

• Does it really work as the video claims it to be? -- Fundamentally yes, but the debt paradox is not true, so many of the conclusions are wrong.
• Does the same yield for the Euro or Yen for example? -- Yes
• Would a gold standard really solve all our problems, or would it create others? -- A gold standard does not prevent fractional reserve banking, but it does prevent governments from using inflation to postpone default.
• Why would a sovereign country give the right to make money to a private corporation with stockholders, so that they can collect interest? They could just do it themselves without having to pay interest. -- The Federal Reserve was originally created under a gold standard, but it changed as a result of leaving the gold standard. The original idea was that an independent agency would manage the money supply without being controlled by politicians. This has had only limited success. Of course, because now it's the other way around, the politicians are now controlled by the independent agency which controls the money supply. Capitalism basically means whoever controls the money supply, controls the country
• Does it really only work if the system collapses every 150 years or so, which would be the logical future as pictured by the video? -- A collapse is the result of excessive deficit spending by the government, and not some flaw in the system.Also the fact that they lend money that doesn't exist, and expect the borrower to pay it back, with interest.
• If the current system only works if new debt is created to pay the interest on the principle, why aren't a lot of economists rebelling against it? -- Interest can be paid without creating new debt.

Maybe so, but it's still a scam because the richest persons in the world are mostly rich just because they gain huge sums of interest on money they themselves printed. That's the whole reason i use bitcoin, I don't want to depend on monopoly money.

In my example, I am the issuer of the currency. Perhaps the example was not clear. The point is that debt-based currency does not have to be created to pay interest. Interest can be paid with production. The paradox becomes real when the interest exceeds production because then the excess interest can only be paid by new debt, and a collapse is inevitable.

but by the logic of the debt paradox, since 95%+ of the money supply is debt money that is collecting interest, even if the currency that is involved to pay off your own interest is reused, it itself has associated interest due of some third party not mentioned in your example. if the total amount of debt is greater than the total amount of currency in circulation, then does it matter how much the actual total value of goods in the economy grows (e.g. catching additional loads of fish)?

Currency is reused. Suppose my interest payment to the lender is the value of a load of fish. So I go fishing and I get a load of fish. The lender (for example) buys the load with some currency and I make the interest payment with that same currency. I could potentially do this forever and there is no need for additional currency to make interest payments.

I see what you're doing there, but interest (I) and the load (L) have to be paid in dollars, not something else.
I have to take that out of the total money supply (S), where every dollar bears interest (apparently, don't know if this is true).
S = L < L + I
So where does the interest has to come from? Or is this way too simplistic?

• Does it really work as the video claims it to be? -- Fundamentally yes, but the debt paradox is not true, so many of the conclusions are wrong.
• Does the same yield for the Euro or Yen for example? -- Yes
• Would a gold standard really solve all our problems, or would it create others? -- A gold standard does not prevent fractional reserve banking, but it does prevent governments from using inflation to postpone default.
• Why would a sovereign country give the right to make money to a private corporation with stockholders, so that they can collect interest? They could just do it themselves without having to pay interest. -- The Federal Reserve was originally created under a gold standard, but it changed as a result of leaving the gold standard. The original idea was that an independent agency would manage the money supply without being controlled by politicians. This has had only limited success.
• Does it really only work if the system collapses every 150 years or so, which would be the logical future as pictured by the video? -- A collapse is the result of excessive deficit spending by the government, and not some flaw in the system.
• If the current system only works if new debt is created to pay the interest on the principle, why aren't a lot of economists rebelling against it? -- Interest can be paid without creating new debt.

An example of how the debt paradox is wrong: Suppose I am a fisherman and I create IOUs to buy a boat and those IOUs are used as currency. The IOUs are debt, just like the dollar, and they have interest payments. I don't have to create more debt to pay the interest because I can pay the interest with fish (or IOUs gained by selling the fish). Everything is ok as long as I don't go so far into debt that I can't pay the interest with fish. If I have to continually create more debt to pay the interest (as the U.S. is currently doing) then eventually the system will collapse.

Likewise, the dollar will eventually collapse if the U.S. government continues to create money to pay the interest on the debt. The problem is not using debt as currency. The problem is going deeper into debt.

The other day I saw this video.
And I came across many more videos saying more or less the same.
It is very clear that the people behind such videos are against the current system.
That makes the message that they are spreading and explaining a bit colored.
Now, I'm not an economist. I really don't know how much of it is true (maybe all, I don't know).
I'm hoping that there are people roaming these forums that have more understanding of the subject, and would take some time to explain some stuff.
Because I'm thinking that every system has its flaws, but our current system can't be all bad, right?
I suspect some nuances can be made regarding this subject.

Here are some questions that I have about this video:

• Does it really work as the video claims it to be?
• Does the same yield for the Euro or Yen for example?
• Would a gold standard really solve all our problems, or would it create others?
• Why would a sovereign country give the right to make money to a private corporation with stockholders, so that they can collect interest? They could just do it themselves without having to pay interest.
• Does it really only work if the system collapses every 150 years or so, which would be the logical future as pictured by the video?
• If the current system only works if new debt is created to pay the interest on the principle, why aren't a lot of economists rebelling against it?