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What if there was Zero debt?

Discussions about the economic and financial ramifications of PEAK OIL

Re: What if there was Zero debt?

Unread postby vtsnowedin » Mon 23 Oct 2017, 00:35:02

kanon wrote: If you borrow to buy a house and then pay the loan then money was issued and then returned. You end up with a house and no money (actually the interest is not issued, so there is negative money).

I end up with a house I can sell for money or swap for other goods and services. I have also gained the use of the house while I was living in it during the time it took to pay for it.
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Re: What if there was Zero debt?

Unread postby kanon » Mon 23 Oct 2017, 09:21:26

Money and wealth are different. The house is wealth. Unfortunately, people generally do not make the distinction. Today, the FED system uses debt/credit as money, so money is a ledger entry in the banking cartel accounts (with various representations) and is not wealth. If we had precious metal money, then the coins would be wealth and money at the same time. If we used a greenback system, then money would be separate from wealth and would not disappear when debts are repaid or written off.
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Re: What if there was Zero debt?

Unread postby vtsnowedin » Mon 23 Oct 2017, 10:14:01

kanon wrote:Money and wealth are different. The house is wealth. Unfortunately, people generally do not make the distinction. Today, the FED system uses debt/credit as money, so money is a ledger entry in the banking cartel accounts (with various representations) and is not wealth. If we had precious metal money, then the coins would be wealth and money at the same time. If we used a greenback system, then money would be separate from wealth and would not disappear when debts are repaid or written off.

A distinction without a difference. A $300,000 house (paid for) and $300,000 in cash in your vault or as an account balance in your bank or a $300,000 stock portfolio or bond portfolio are all the same amount of wealth and all are part of the wealth supply. Post election day the stock markets are up about 25% of five trillion dollars. What debt generated that new store of wealth?
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Re: What if there was Zero debt?

Unread postby GHung » Mon 23 Oct 2017, 10:39:41

"Post election day the stock markets are up about 25% of five trillion dollars. What debt generated that new store of wealth?"

US companies spent $4T buying back their own stock

.....Bowen says he’s worried, because for most Americans, the stock market is a display of public confidence. But it may all be a huge fantasy, Bowen added, a Ponzi scheme that will end in tears.

Schiff says that could occur if interest rates keep rising, ensnaring corporations that financed stock repurchases with debt. “They are going to have to sell their stock to repay the debt they can’t afford,” he said. “That’s going to end up destroying a lot of shareholder value if corporations have to sell equity into a bear market.”
http://nypost.com/2017/08/19/us-compani ... own-stock/


Companies are increasingly buying back stock with borrowed money

Share buybacks are among the more controversial practices in corporate America. It falls under the stigmatized category of “financial engineering.” And since the financial crisis, companies have spent trillions buying back stock.

While the bulk of these buybacks have been financed with cash flows from operations, interest rates have been so low that companies have been incentivized to actually borrow money to buy back stock. In fact, recent data show buybacks are increasingly being financed by debt.

“S&P 500 (^GSPC) companies have announced 141 new buyback programs YTD with an aggregate dollar value of $327 billion,” JP Morgan’s Dubravko Lakos-Bujas observed. “39% of repurchases YTD were funded by issuing new debt versus 22% in 2015.”....
https://finance.yahoo.com/news/share-bu ... 00439.html
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Re: What if there was Zero debt?

Unread postby vtsnowedin » Mon 23 Oct 2017, 11:27:19

So 327 billion times 39% is 127.5 billion of debt gains $5,000,000,000,000 in new value? Such a deal! :oops:
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Re: What if there was Zero debt?

Unread postby GHung » Mon 23 Oct 2017, 11:35:06

vtsnowedin wrote:So 327 billion times 39% is 127.5 billion of debt gains $5,000,000,000,000 in new value? Such a deal! :oops:


That was one year. That $5 trillion didn't all happen during that period, and if you truly believe stock values have actually risen that much, go for it.
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Re: What if there was Zero debt?

Unread postby vtsnowedin » Mon 23 Oct 2017, 12:03:42

GHung wrote:
vtsnowedin wrote:So 327 billion times 39% is 127.5 billion of debt gains $5,000,000,000,000 in new value? Such a deal! :oops:


That was one year. That $5 trillion didn't all happen during that period, and if you truly believe stock values have actually risen that much, go for it.

That five trillion has happened sense election day last November so in less then one year.
The lawyers axiom is that "something is worth what it will bring" The DOW is at 23,348 as I write this and on the day before the election it was at 18,259 an increase of 28 percent. Wither you owned Dow stocks before the election or bought them that day (or your retirement fund) you made a 28% profit so far this year.
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Re: What if there was Zero debt?

Unread postby radon1 » Mon 23 Oct 2017, 12:20:32

According to statistics, the world as a whole runs a sizeable trade surplus, which hints at imperfection of statistics.

On a wider point of a debt-free condition, a debt-free condition means moneylessness.
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Re: What if there was Zero debt?

Unread postby vtsnowedin » Mon 23 Oct 2017, 12:28:44

radon1 wrote:According to statistics, the world as a whole runs a sizeable trade surplus, which hints at imperfection of statistics.

On a wider point of a debt-free condition, a debt-free condition means moneylessness.

If if you were right, which you most certainly are not, the world will never be free of the current years taxes so we will never be debt free so need not worry about running out of money. :)
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Re: What if there was Zero debt?

Unread postby kanon » Mon 23 Oct 2017, 12:58:28

vtsnowedin wrote:
kanon wrote:Money and wealth are different. The house is wealth. Unfortunately, people generally do not make the distinction. Today, the FED system uses debt/credit as money, so money is a ledger entry in the banking cartel accounts (with various representations) and is not wealth. If we had precious metal money, then the coins would be wealth and money at the same time. If we used a greenback system, then money would be separate from wealth and would not disappear when debts are repaid or written off.

A distinction without a difference. A $300,000 house (paid for) and $300,000 in cash in your vault or as an account balance in your bank or a $300,000 stock portfolio or bond portfolio are all the same amount of wealth and all are part of the wealth supply. Post election day the stock markets are up about 25% of five trillion dollars. What debt generated that new store of wealth?

On the contrary, the distinction between money and wealth is critically important. It is mere sophistry to confuse the "money supply" with the "wealth supply." The stock market valuations you cite are based on a few transactions at the last price, applied to the entire stock supply. If you tried to sell all the stock supply at once, the price would be considerably different. Further, you completely confuse "wealth supply" with inflated money prices which are most clearly shown in real estate and securities markets, both of which are firmly controlled by the banking cartel. Answering the OP question in a useful way requires a clear understanding of money, debt, and wealth rather than confusing the matter with obstinate comments. An education (3.5 hour) can be begun here: https://www.youtube.com/watch?v=_FUz0vPZc7w&t=2978s

This topic is actually important to the "peak oil" scenario of this board and there is an abundance of misguided commentary (example: http://peakoil.com/consumption/the-approaching-us-energy-economic-crisis) on the relation between money, debt, and wealth. One must realize that the money system is a fundamental political issue and the manner of issuing and controlling money is central to the basic question of resource allocation and availability. So IMHO, the OP question is worthy of careful consideration:
Quinny wrote:I was looking at some debt figures the other day, and asked myself how much debt is actually cancelled out by a contra transaction?
What if netted out there was zero debt? Other more direct World order and PO related questions spring to mind as well.

For example, I spent a lot of time a while back researching public transportation. What I learned was that we could have a perfectly adequate transportation system using less that 25% of current fossil fuel consumption. However, we would not have car payments, suburban sprawl, or much justification for the military industrial complex.
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Re: What if there was Zero debt?

Unread postby Outcast_Searcher » Mon 23 Oct 2017, 13:12:56

GHung wrote:kanon said; "But we could educate ourselves on the money subject and create a system that did not require destruction of the environment, colonial exploitation, debt servitude, etc. If, of course, we could understand how to maintain acceptable social relations in the process."

Are you kidding? The is no "we" when it comes to being proactive about the future and long-term benefits to society, especially when it involves 'haves and have-nots' and the 'haves' giving up something for the betterment of the collective..

Or for EVERYONE to have far less children on average, to reverse worsening the population probem. Or for EVERYONE to be willing to consume less, for the benefit of the planet and future generations. (And of course, if voters en masse had this attitude, suddenly passing a CO2 tax in, say, all major countries would be no problem).

But let's pretend the problem is all the "evil rich" (i.e. "haves") because? They're an easy target to hate on by groups like the far left who ignorantly keep blathering that the "rich pay little or no income taxes" in the US, despite all the credible data from the IRS, etc. that clearly says otherwise. Like when they bemoan that proposed income tax "favor the rich". Who do they think they're kidding? Oh yes. Uninformed voters. But the left claims the right owns that meme).

The rich could give up everything tomorrow. The (vast majority of the) 99% would still destroy the planet as quickly as their wallets, their desires, and their ability to borrow from tomorrow and spend today would let them.

Nature will eventually take care of the problem if "the collective" doesn't wake up.
Given the track record of the perma-doomer blogs, I wouldn't bet a fast crash doomer's money on their predictions.
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Re: What if there was Zero debt?

Unread postby Outcast_Searcher » Mon 23 Oct 2017, 13:19:38

kanon wrote:For example, I spent a lot of time a while back researching public transportation. What I learned was that we could have a perfectly adequate transportation system using less that 25% of current fossil fuel consumption. However, we would not have car payments, suburban sprawl, or much justification for the military industrial complex.

Speaking for the US:

The idea of public transportation being much more efficient in large cities makes a lot of sense. When I considered moving to a large city for my job, one of my clearest decisions would have been to give up a car, use the terrific public transit system, and just rent a car for out of town trips if needed.

However, I don't think that makes much sense for the huge rural areas blanketing most of the red states, and much of the blue states. I'm having trouble imagining how such a thing would work, especially in the VERY rural areas -- short of the roboticized taxi system. And that being economical is (IMO) very much a wait and see proposition, because reasonable wait times would require too many cars (waiting a lot) in too many places, to be consistently quickly available for rural areas.
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Given the track record of the perma-doomer blogs, I wouldn't bet a fast crash doomer's money on their predictions.
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Re: What if there was Zero debt?

Unread postby evilgenius » Mon 23 Oct 2017, 13:24:07

You people who are constantly calling for an end to the Fed and wailing about the evils of fiat currency are actually calling for the rule of the king. You fail to understand that fiat currency comes with the expansion of democracy. It sees money as a tool for individuals to exercise power. Money supply expands along with debt because the use of money, which is being borrowed, allows people more degrees of freedom. You can argue that money has nothing to do with real freedom, but that is a separate topic. What it does do is allow people to exercise power relative to their circumstances. How easily they can get it has direct bearing upon how they will use it.

When the world was organized according to kingdoms all of the 'wealth' that was used to back currency was technically owned by the king. It turned out that the king didn't exist in a vacuum. There were, first of all, other kings. Never mind the hardships of nature requiring spending, kings could ignore your suffering, it was confrontation with other kings that drove kings to get into debt. That is when kings 'discovered' the reality of their immediate aristocracy beyond its role in determining succession. By seeing the role that the aristocracy could play as landowners, and serf owners, they could derive additional value in order to confront other kings. They could not only tax, but borrow from the immediate aristocracy. Even doing this, however, they could still achieve bankruptcy. That meant they had a much harder time borrowing, and couldn't afford much of a standing army. Their chances against other kings were diminished.

Each world dominating power, as they evolved, had to deal with what to do when providing for a standing army. The standing army was the exemplary way of exercising power. Standing armies also cost more than could be collected, if the desires of he king went too far. The English were the first to realize they could expand the circle of power beyond that of the aristocracy, by instituting a Parliament. The trade off was one that allowed for a much greater economic pool from which to fund a standing army. It also gave sovereignty to the people. Not really the people, but to the merchants who had the money that the crown needed in order to fund the exercise of power. What we understand as a practice of democracy came about so that the crown could expand its exercise of power. We understand it as an exercise of democracy because certain inalienable attributes of such a transfer necessarily applied to the people at large. First, the suffrage only expanded to land owning men. Then to all indigenous men. Then to men who were outsiders, like ex-slaves or foreigners. Then to women. Then to arguments about voting age. I'm sure I've missed a few points in between. I don't mean to alienate any particular group.

What the fiat money system has done is to allow for this expansion of suffrage. It puts the exercise of power into the hands of the people. The argument against it is not the one which its detractors suppose when they speak of its instability. The argument is actually that of Aristotle, when he said that democracy always devolved into mob rule. For it is by malfeasance across the board, the overwhelming taking on of debt which people ought to know they cannot repay, but take on anyway, by numbers of people vast enough to make a difference, that the system is threatened. There is no grand banker conspiracy. That is just individuals pining to have sovereignty taken out of their hands, or, on a more sinister level, placed into their hands - as they believe they would enjoy a position as members of whatever aristocratic form of rule would follow.

The concept of the standing army as the exemplary exercise of power still holds true, even though democracy has spread the suffrage. That is why the Fed remains a quasi-governmental body. That is why money remains a sovereign issue. You should be glad of that, at least in concept, for it is that version of government, the regulator, which serves to rein in borrowing. Such regulation's intent ought to be to prevent borrowing on a level which tempts systemic default. I believe history will see that it was the Fed's perceived mandate to control inflation, acting in conflict with the Fed's more reasonable purpose, which caused the Great Recession. Their actions to limit workers wages, and force more borrowing as the people sought exercise of power, over a period of time that lasted longer than inflation as sole driver, which is troublesome for sure, actually ruled, had a direct bearing upon the growth of excess debt beyond what could be repaid. Such a mandate is actually the providence of kings, inasmuch as it comes with perfunctory assertions of its legitimacy, in a power struggle with the people. The real trouble with the Fed, in other words, is not whether it should exist, but for whom should it exist. It ought to walk a line, both for and against seemingly egregious expression, as such a thing is both necessary and regrettable. If it doesn't do that, as well as service some kind of understood monarchical urge hidden within the structure, then it will fail.
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Re: What if there was Zero debt?

Unread postby vtsnowedin » Mon 23 Oct 2017, 14:29:48

My parents and Grand parents lived through the Great Depression 1929 to 1939 and from their accounts it was fifteen times worse then this last little recession. Bank closings with no FDIC account insurance, deflation, 25% unemployment, no welfare or social security. No health insurance and no medicare.
Cash was king and the man that had loans that could be called in was the loser.
Zero debt was and is the only safe way to go.
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Re: What if there was Zero debt?

Unread postby kanon » Mon 23 Oct 2017, 15:47:42

evilgenius wrote:You people who are constantly calling for an end to the Fed and wailing about the evils of fiat currency are actually calling for the rule of the king. You fail to understand that fiat currency comes with the expansion of democracy. . . .

The current FED system is not about democracy. This is another argument that does not look at the facts. I certainly agree that money system we should have would work hand in hand with democracy, but it would not be the debt money of the FED system and we would not need federal debt to maintain the money supply. The greenback is a possible example of such a money system, but the credit/banking system would be different due to removing fractional reserve lending, i.e. the ability of banks to issue money.

In fact, the implication that we have a vital functioning democracy due to FED debt/money is ridiculous. The truth is more like democracy has become meaningless as the public and government are forced ever deeper into debt. Student loan debt seems a great example here.
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Re: What if there was Zero debt?

Unread postby vtsnowedin » Mon 23 Oct 2017, 17:16:26

There is nothing wrong with fractional reserve banking as long as the vast majority of the loans are sound. If you had to wait until the entire amount of a loan was repaid before you re lent out any of the repayments you would place a drag on the economy to no good purpose.
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Re: What if there was Zero debt?

Unread postby kanon » Mon 23 Oct 2017, 18:13:31

vtsnowedin wrote:There is nothing wrong with fractional reserve banking as long as the vast majority of the loans are sound. If you had to wait until the entire amount of a loan was repaid before you re lent out any of the repayments you would place a drag on the economy to no good purpose.

Fractional reserve lending is a euphemism for the banking cartel having the power to issue money. They do not issue money to avoid a drag on the economy as we have recently seen. They issue money to their cronies and people who will do what they want, such as bid up real estate and securities prices, overthrow African and ME governments, spread GMO material around the globe, etc. If people had more money and could save, then they would not need so much debt, but that is foreclosed by real estate prices, the need for a car, and lower wage income. If you do not understand the housing bubble and how the banking cartel has rigged the game in their favor, then you should open your eyes. Maybe you see where we have a debt fairy looking out for us.
GHung wrote:Are you kidding? The is no "we" when it comes to being proactive about the future and long-term benefits to society, especially when it involves 'haves and have-nots' and the 'haves' giving up something for the betterment of the collective..

So true.
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Re: What if there was Zero debt?

Unread postby Outcast_Searcher » Mon 23 Oct 2017, 20:04:18

radon1 wrote:According to statistics, the world as a whole runs a sizeable trade surplus, which hints at imperfection of statistics.

On a wider point of a debt-free condition, a debt-free condition means moneylessness.

Well, aside from using a credit card for convenience, and paying it off (interest free) in full every month, unless I'm missing something, I literally haven't had ANY debt in 14 years.

So this means I have no money? Because, somehow, I seem to be enjoying my retirement and untroubled by bill collectors, for someone with no money.

...

Now, if you mean a modern first world economy overall can't operate AT ALL efficiently without any debt -- I strongly agree.
Given the track record of the perma-doomer blogs, I wouldn't bet a fast crash doomer's money on their predictions.
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Re: What if there was Zero debt?

Unread postby Outcast_Searcher » Mon 23 Oct 2017, 20:07:28

vtsnowedin wrote:There is nothing wrong with fractional reserve banking as long as the vast majority of the loans are sound. If you had to wait until the entire amount of a loan was repaid before you re lent out any of the repayments you would place a drag on the economy to no good purpose.

And this is a point the doomer types constantly completely ignore when they talk about gross debt. Consumer debt has shrunk meaningfully in the US since the 2008-2009 crash, even while the US economy has grown overall, which is a very good thing in terms of the overall quality of debt.

But if someone mentions that when the doomers only talk about gross debt numbers, you tend to get crickets or an ad hom.
Given the track record of the perma-doomer blogs, I wouldn't bet a fast crash doomer's money on their predictions.
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Re: What if there was Zero debt?

Unread postby vtsnowedin » Mon 23 Oct 2017, 20:22:42

kanon wrote:
Fractional reserve lending is a euphemism for the banking cartel having the power to issue money. They do not issue money to avoid a drag on the economy as we have recently seen. They issue money to their cronies and people who will do what they want, such as bid up real estate and securities prices, overthrow African and ME governments, spread GMO material around the globe, etc.
You really need to get a grip.
Bankers issue loans as fast as they can because they make money on every good loan to the tune of the margin between whatever they paid the depositor and or the central bank for the money and the interest rate and fees they charged the borrower. There is no profit in just letting it sit molding in a vault. They could give a rats pahtoot about any African or ME government and would only care one way or the other about GMO material if they were lending Monsanto money to build a new factory or plant.
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