I just typed up about an hour long explanation of our countries monatary system to settle a debate on a news article figured I might as well post it here.
Alright So it seems once again that people don't understand the nature of money.
In truth, money is very easy to understand, but it's almost certain that you'll have no real idea what it is. Unfortunately a powerful illusion has been crafted around money; we've all been victims of this illusion, that's almost all of the 6.8 billion people on Earth who depend on a monetized economy for the basic components of life: water, food, shelter, clothing, energy, education, recreation etc. money is 'promissory' that means it comes into existence on the back of your promise to pay it out of existence again. There is clearly no need for lending and borrowing in the world of promissory money. On the other hand, if money comes into existence on the back of a promise to pay it out of existence again, then this money must be debt.That, then, is where money comes from. Like everybody else, you probably think that money already exists and exists only 'out there', that you have no ability or right to bring money into existence on your own behalf. You probably think that when you, or your country, needs to make use of debt, money must be 'borrowed' and borrowed, of course, at interest. You now know this is false.that money is 'created' at the point when somebody takes on debt and that it draws its integrity (its value) from the debtor's promise to pay it out of existence again. I don't think it's a stretch to conclude that banks are at the heart of the world's most devastating problems and can take upon their own shoulders responsibility for the fact that so much of the world is blighted by crushing poverty, endless interest-bearing debt and the sickness and suffering poverty and hopelessness brings. Many will also know that banks go beyond the unwarranted taking of interest and into other nefarious activities such as speculation in currency and commodity markets and, with political assistance, ensuring that vulnerable populations are saddled with debts which do not benefit them and which they cannot pay.
Allow me to provide an example.
Person A, wants to buy a house, but needs a loan to do it so he goes to the bank.
The bank says "Alright, you can pay your debt later to us."
The bank then marks down in the ledger... say 200,000$
The bank then, generates 200,000 in credit on Person A's behalf
Person A buys house from person B
Person B now uses that money to purchase goods and services, bringing him to 0
Person A, at this time sells his own services (like a job) to bring his account to 0
the money is then wiped out of existance and the bank can continue to provide loans.
That is the ideal scenario, unfortunately at the moment, it doesn't work that way, the wealthy aren't spending their money. this creates a very dramatic and pivotal problem for the banks
Below is an example of how it actually functions
Person A wants to buy a house so he goes to the bank for a loan.
the bank says "Sure you can pay it back, heres 200,000 and marks down the debt and credit.
the bank then begins to record intrest, taking the extra money from intrest and keeping it themselves, therefore generating money on someone elses debt.
Person A goes to buy a house from person B.
Person B takes the payment and doesn't recirculate it believing he has no need to spend it now.
Person A tries to sell his services (as an employee typically) to pay off this debt.
The banks, now have a ledger with a really slow defecit thats going away, they eagerly await person B to purchase a service so they can write the credit out of existance.
Then person C needs a house, and though the bank hasn't gotten the credit or the debt written off they accept and give person credit. the process is repeated.
So, if the wealthy aren't spending money, then other people can't earn that money, to pay the banks, and I'm not saying it's the wealthy who has to pay the debts of the poor, I'm saying the wealthy has to buy stuff, make investments. this means, that the person who is now getting the wealthy persons money can use said money to clear debt, or hire workers. these jobs allow the poor to pay their debt, and the banks may clear the their ledgers and remove the money from existance this is the goal.
Now when the wealthy don't spend their money, or they spend their money abroad, those negative intergers remaiin in the banks ledger, as that 200,000 that person B had is no longer available to be earned by person A, yet person A is still responsible for their debt
This causes the banks to create interest, trying to encourage people to pay their debts quickly thusly allowing the banks to remove that protion of money from the ledger, this makes it even mroe difficult on the individual in debt, as the wealthy, who recieved the credit in the end, are not spending that money encouraging buisness' to either A.) hire workers to deal with a larger demand. or B.) spend it somewhere that will cause a buisness to hire workers to deal with a larger demand.
Let me explain how this truth behind money applies to our debt.
With all of this money that was generated in america, and then unspent or spent elsewhere, the banks can not close those accounts and get rid of the money, as above, less spending means less demand, which means less work, which means less money returning to bank circulation.
A few years back we made a massive stimulous package to help clear out debt from the banks. the theory was, if we give money to banks and job holders they can hire people who can spend money on buisness who can then clear debt.
It did not pan out this way, the massive amount of prommisory the stimulous package made set a -huge- debt in the ledgers. so our already steep debt got more steep, in hopes of clearing debt in the long run. the problem is, this money still went unspent, or spent abroad, meaning we took this massive debt for nothing.
So naturally, if the banks were unable to clear the negative integers by relying on the people to spend money, which would create demand and create jobs, they had to go to other methods, so they repossessed homes and properties, claiming money directly out of paychecks Obviously this was very bad for those people who were honestly trying to pay back the debt, but the credit that was generated for it, is either stagnating with it's wealthy owner, or it's overseas.
due to the traumatic nature of losing your house and resources, the government said "no banks, you cant do that." This in turn caused the government to increase taxes, to provide social services and govenrment jobs to people so they can help clear this massive debt to the banks.
at this time, the wealthy still aren't spending money, yet the wealthy is irritated by paying more taxes and higher wages, so they moved jobs overseas, and tehre money, is no longer here being rrecycled into the bank. and thusly more monet is generated that is almost immediately sent overseas, this is why the debt is increasing.
now If any of you have read all of this, It means It doesn't matter who was president this term, it could have obama, mccain, romney you or I and we still would nto have been able to stop the debt from growing.
On a final note, it is kind to remember that regardless of whether an individual is, gay, straight, democrat, republican, white, or black. We are all human, and we are all american even if we have different views and it may make us really upset, try to remember we're all the same just with a different perspective.
You can find out more about Promissory here