The only way out of debt

ninky_2

OP i have to say i don't really 'get' your concept of just printing the money. surely it still represents 'debt' because you don't actually get that money for free - you have to work for it, and who decides what that work is worth and also what the goods and services that work then buys are worth?. your point does not tackle the real issue of 'value'.

a banknote of itself is pretty valueless being just a piece of printed paper. it represents an iou note. yet who decides what that note will actuallly get you?

in some small ways some people are going back to barter systems and doing away with money with skill swaps etc. not looked on that favourably by the taxman but not big enough an issue to be dealt with yet. there is a lot to be said for this more human way of operating but it only works with more simple things. a little more complicated if you want to buy a package holiday for example.

so in your system, where does the value come from?

ILW

From a brief look at the OPs theory, they seem to have ignored inflation. The more money you print, the less it is worth. Possible I have missed something though.

Masomnia

ILW wrote: »

From a brief look at the OPs theory, they seem to have ignored inflation. The more money you print, the less it is worth. Possible I have missed something though.

I don't think you have. Correct me if I'm incorrect, but the current system seems to work because if the money is created and lent out by banks, it is added as a liability in one set of books and an asset in the other.

If money is just created and used to pay off debt Weimar Germany styleeee the inflation would be ruinous, as nowhere is a liability created.

That's the way I think it works anyway, I'm just a recent history graduate trying to make sense of things

sarah_elton

samclam wrote: »

Yeah but I'm not a nut job and this subject isn't new to me. I've met the economics graduates behind www.Call4Reform.org and I think they have something genuinely constructive to say.

I'm an economics graduate and I despair of whatever university produced these people.

Thrugelmir

samclam wrote: »

Banks don't do their jobs effectively, we bailed them out and they don't use the cash to get the economy going again by lending to small business they just give it to themselves in bonuses. Do like being ripped off?

Generalisation is political spin. It shows both a lack of understanding of business finance and knowledge of banks. Putting Lloyds and Goldman Sachs into the same category is also totally misleading.

tomterm8

Kohoutek wrote: »

I'm not advocating the OP's link, but the last three years IMO is a pretty powerful rebuttal that the model you describe actually works

Kohoutek wrote: »

It's maybe possible to have a mix of both. You can have a privatised banking system where the government retains significant power to influence the allocation of capital – say China today, or South Korea a few decades ago...

Or the government can set up one or more state owned banks alongside the private banking system, that perhaps focuses on different priorities (e.g. exclusively lends for government infrastructure projects) than mainstream commercial banks. North Dakota has its own bank for example.

Um, America is full of such banks (Fannie Mae, Freddie Mack - to put this into perspective, these two organisations control assets on a par with the UK government).

It doesn't seem an new idea, and doesn't seem to me to be a cure for banking crises?

julieq

Emy1501 wrote: »

I dont really get peoples love of debt for housing. From I can see my parents bought a house 25 years ago. Now its worth 10 times what they paid. Unless they down sizes they will not realise any of this wealth.

Could they not just sell one of the other 4 or 5 they own?

You have to laugh, really you do. Poor Emy, her parents only own like a HANDFUL of houses, and they OH SO WANT them to go down in value so that everyone else can do the same as they did. But they can't quite bring themselves to practice what they preach.

They'll be baby boomers, definitely. EVIL baby boomers.

Actually very few people on the "bull" side want rampant HPI - as you point out those of us who have just the one house (yes Emy, such people do exist, frightful as it seems) don't really benefit from it, and the only reason someone with more would want it is the same as why savers want high interest rates, or gold investors want gold to go up, it makes money for them without them having to do anything at all to earn it. Not wanting falls is NOT the same as wanting HPI.

To keep the economy stable, which is in everyone's interest, default rates on existing loans need to be kept low. If they're not, or if there's uncertainty (as there was with securitised loans which caused the banking crisis), then you're off to hell in a handcart. There's no real point in having a cheap house and no job.

As for the OP, well yes, printing money and handing it out worked in pre-war Germany, and it worked in Zimbabwe, and I'm sure it can work again here, just the same. The idea of paying public sector workers (and their pensions) in monopoly money is a MASTER stroke, would certainly solve the debt crisis. Nice job.

Kohoutek

tomterm8 wrote: »

Um, America is full of such banks (Fannie Mae, Freddie Mack - to put this into perspective, these two organisations control assets on a par with the UK government).

It doesn't seem an new idea, and doesn't seem to me to be a cure for banking crises?

Maybe true, but monolithic state sponsored banks like Fannie Mae and Freddie Mac didn't cause the banking crisis.

A lot of the reason Fannie Mae and Freddie Mac go into so much trouble is because they bought huge amounts of securitised mortgages from commercial banks to provide more liquidity to the US housing market, which turned out to be 'assets' that had very little value.

Kohoutek

ILW wrote: »

From a brief look at the OPs theory, they seem to have ignored inflation. The more money you print, the less it is worth. Possible I have missed something though.

You only get inflation if more new money is created than new goods and services created. You need to have inflation to sustain the current system anyway – that's why on any long term graph of the money supply, the trend is always an upward curve:

US money supply

UK M4

The OP's theory depends on the government showing considerable self-restraint in creating new money – in practice, not likely to work.

Emy1501

julieq wrote: »

Could they not just sell one of the other 4 or 5 they own?

You have to laugh, really you do. Poor Emy, her parents only own like a HANDFUL of houses, and they OH SO WANT them to go down in value so that everyone else can do the same as they did. But they can't quite bring themselves to practice what they preach.

They'll be baby boomers, definitely. EVIL baby boomers.

Actually very few people on the "bull" side want rampant HPI - as you point out those of us who have just the one house (yes Emy, such people do exist, frightful as it seems) don't really benefit from it, and the only reason someone with more would want it is the same as why savers want high interest rates, or gold investors want gold to go up, it makes money for them without them having to do anything at all to earn it. Not wanting falls is NOT the same as wanting HPI.

To keep the economy stable, which is in everyone's interest, default rates on existing loans need to be kept low. If they're not, or if there's uncertainty (as there was with securitised loans which caused the banking crisis), then you're off to hell in a handcart. There's no real point in having a cheap house and no job.

As for the OP, well yes, printing money and handing it out worked in pre-war Germany, and it worked in Zimbabwe, and I'm sure it can work again here, just the same. The idea of paying public sector workers (and their pensions) in monopoly money is a MASTER stroke, would certainly solve the debt crisis. Nice job.

I seem to have touched a nerve with you. What my parents have and want they want are not relevant to exactly what I want. I can't see on this thread where I have mentioned my parents wanting prices to go down and the relevance to my post.

I think if you read some of my other posts I have said I would like no real term rises in the near future which would allow wages to catch up with prices. I personally only see banks winning at the moment.

I was being selfish then price falls would be best for me in the short term but for the economy no.