Question regarding the deficit/debt

[apple0154]

I hear two statements being made. The first is the deficit/debt is too high and the country/people can't afford to repay it. I also hear the money system is based on fiat currency.(A fiat currency is essentially an invented money system whereby there is no actual commodity, nothing of real value, backing the system.)

OK. In the old days a shopkeeper would deposit $50.00 in his local bank and a farmer would go to the bank and borrow $50.00 to buy food for his cattle and seeds to plant. That meant the farmer owed the bank $50.00 and the bank owed the shopkeeper $50.00. (We'll forget about interest for the time being.) The bottom line being the farmer owed the shopkeeper so if the farmer never paid the bank the bank couldn't pay the shopkeeper and the shopkeeper would be out $50.00.

Now we have fiat money. A person goes to the bank and borrows $50.00. While the Federal Reserve loaned the bank the money nobody loaned the Federal Reserve any money so if the person does not pay back the $50.00 to the bank and the bank doesn't pay the Federal Reserve $50.00 who loses? There never was any money loaned. No one is out the $50.00.

Now, too much of that "loan and don't pay back" idea can lead to inflation but considering the secrets the government keeps why can't they keep the secret about how much money is loaned out by the Federal Reserve? Wouldn't it be better for Congress and the President and associated folks to "cook the books" rather than have a possible monetary collapse?

On that note it's time to cut the lawn because I never paid anyone to cut it for me.

 

[FUCK THE POLICE]

All money systems are invented. Commodity backing of money is training wheels for a monetary system, to give people greater respect for it. It's stupid too keep it once you no longer need it. The government has its own reasons not to let inflation get out of control, as it has interests in maintaining a currency whos value changes in a stable and predictable manner.

 

[FUCK THE POLICE]

People who claim that fiat money is worthless are hypocrites, because they still go around using this "valueless" money.

 

[apple0154]

All money systems are invented. Commodity backing of money is training wheels for a monetary system, to give people greater respect for it. It's stupid too keep it once you no longer need it. The government has its own reasons not to let inflation get out of control, as it has interests in maintaining a currency whos value changes in a stable and predictable manner.

So the money can be paid back any time as no one really lent it. In other words the current debt does not have to be paid back in any set amount of time. If it takes 10 years to pay the debt or 50 years it doesn't really matter as no one is waiting for that money because no one lent it.

Another thing that seems strange is when people talk about future generations paying for today's debt. For example, let's say the government builds an interstate highway. Once it's built the cost of maintenance will a lot less than the original cost of clearing land, laying a base, putting in lights and drainage, etc. so why should the generation that originally built the highway pay all the costs? It seems logical future generations should pay for a portion of today's debt.

 

[FUCK THE POLICE]

So the money can be paid back any time as no one really lent it. In other words the current debt does not have to be paid back in any set amount of time. If it takes 10 years to pay the debt or 50 years it doesn't really matter as no one is waiting for that money because no one lent it.

I really don't understand what you're saying.

Banks lend out money, and they do so on the understanding with you that you'll pay it back after a period of time. Should you fail to do so, there are various legal mechanisms in place that enforce payment to some degree. Of course, in our system you aren't infinitely reliable for debt, there is a bit of a two way responsibility, and banks are responsible for stupidly choosing to lend to people that obviously can't pay it back.

 

[FUCK THE POLICE]

Another thing that seems strange is when people talk about future generations paying for today's debt. For example, let's say the government builds an interstate highway. Once it's built the cost of maintenance will a lot less than the original cost of clearing land, laying a base, putting in lights and drainage, etc. so why should the generation that originally built the highway pay all the costs? It seems logical future generations should pay for a portion of today's debt.

I dunno, I have romantic notions about wanting to not straddle down my children with debts. Perhaps that is passe in the modern environment.

 

[apple0154]

I dunno, I have romantic notions about wanting to not straddle down my children with debts. Perhaps that is passe in the modern environment.

It's not straddling down anyone. It's expecting future generations to contribute towards the society into which they are brought. When a child turns 18 and gets their driver's licence who built the roads on which they will drive? Do they have to dig their own well or just turn on the tap for a glass of water?

If someone doesn't want to contribute to society there are still fairly remote areas in which to live. They don't even have to work. They can build their own log cabin, dig a well, plant a garden.....good luck with surviving that way.

Today, some folks have a shower using municipal water, drive on roads already constructed, use technology at work and then complain about contributing to society. If it wasn't for society they'd be washing in a river and walking on a trail through the bush to get to where they wanted to go.

 

[apple0154]

I really don't understand what you're saying.

Banks lend out money, and they do so on the understanding with you that you'll pay it back after a period of time. Should you fail to do so, there are various legal mechanisms in place that enforce payment to some degree. Of course, in our system you aren't infinitely reliable for debt, there is a bit of a two way responsibility, and banks are responsible for stupidly choosing to lend to people that obviously can't pay it back.

My point is the debt can be spread over a long term as no one actually loaned any money. The money was printed and backed up with nothing.

It's the same thing with people who can't afford their mortgage when they lose their job. If they miss a few monthly payments the bank forecloses. Why? Simply extend the term of the mortgage.

Let's say Mr. Smith owes another 10 years on his mortgage. If he pays the regular monthly payments the bank collects the money and loans it to a Mr. Brown. If Mr. Smith doesn't pay any of the capital (just pays the interest) the bank simply extends Mr. Smith's mortgage. In both cases the money is lent out as no one needs the money. No one loaned the bank the money. The Federal Reserve simply printed money and gave it to the bank to loan out. It doesn't matter to whom the bank loaned the money as it continues to be loaned out whether it's to Mr. Smith or Mr. Brown.