Why We Have Debt

[FOWL]

For anyone wondering how it is every nation on Earth can be in debt, you must not know that money is issued by private banks to nations to be payed back with compounding interest. Why this has taken place is irrefutable proof that governments are mere puppets here to distract us and rob our wealth and resources for a small consortium of private bankers. This is especially insane in Canada, considering legally all our currency should be issued by the public Bank of Canada, yet they only create 2% of our money, while the other 98% is issued as credit out of thin air by private banks. Why would our government borrow money they have to pay back, with interest to private companies? Does this make any sense? Are you enraged? Less than 9% of your tax dollars, and income from the busninesses owned by the Canadian government are used for social programs and infrastructure. That's right, more than 90% of every tax you've ever paid has gone directly into the coffers of criminal bankers. Does that make you happy? I'm sure it does. Watch this to learn more and nexus out from there. I'm sure you can see this is the largest problem affecting our society to date.

http://ca.youtube.com/watch?v=O8Zl1Wax8MI&feature=related

[Birdy]

I agree national debt is one of our biggest problems, but this post makes me laugh.

So is your answer to have the Bank of Canada just print shit loads of money to pay for any and all government expenditures? Are you kidding me?

Ever heard of inflation? Soaring interest rates?

There’s nothing criminal about a bank loaning money and asking to be paid back with interest. That’s how they work.

[bradm]

There’s nothing criminal about a bank loaning money and asking to be paid back with interest.

I concur. If I were asked to loan somebody some money, I not only need to be paid back, I need to have my cost* covered, and charging interest is one way to do that.

Aloha,

Brad

* Specifically, the opportunity cost of not being able to enjoy the benefit of using that money some other way in the time it's loaned out.

[d_rawk]

Totally agree with Birdy and bradm, if that is what the OP was getting at. We have a mechanism for extracting capital from private interests at what is deemed a fair rate for the maintenance and improvement of the infrastructure that allows them to thrive - it is called taxation. The gov. can't just demand money from private interests outside of that and without fair compensation for tying it up, and we shouldn't want it to have that power.

However, watching the linked video, Abram's grievance seems to actually be the inefficiencies and consequences of allowing the Bank of Canada Act to be continually violated. And he isn't arguing for the BoC to just print money willy-nilly (hah! That is fun to type), he is arguing that monetary creation ought to occur within the legal framework outlined for such and that the debt incurred via compounding interest by borrowing its own money back from private financial institutions is not only not necessary, but essentially illegal. I don't know if he is correct - it is a pretty shallow treatment of the subject, after all, being a 10 minute video.

Interesting though, thanks FOWL. And welcome aboard.

I believe that banking institutions are more dangerous to our liberties than standing armies

If the American people ever allow private banks to control issue of their currency, first by inflation, then by deflation, the banks and the corporations will grow up around them, will deprive the people of all property until their children wake up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs

[ollie]

There’s nothing criminal about a bank loaning money and asking to be paid back with interest.

I concur. If I were asked to loan somebody some money' date=' I not only need to be paid back, I need to have my cost* covered, and charging interest is one way to do that.

Aloha,

Brad

* Specifically, the opportunity cost of not being able to enjoy the benefit of using that money some other way in the time it's loaned out.

But what if you had so much money that you weren't going to do anything with the lent-out money anyway?

[d_rawk]

But what if you had so much money that you weren't going to do anything with the lent-out money anyway?

That never happens. Even a high interest savings account is doing something with the money. Besides, banks in Canada are public companies, and as such, are legally required to pursue growth at any cost that doesn't explicitly violate the law (one of many reasons, like all public companies, they find themselves continually in such compromising situations playing at the fringes and grey areas of law).

[FOWL]

I'm afraid you don't understand how this works, or what I am talking about. Of course printing money not tied to a commodity such as gold, or the GDP is insane, and causes inflation which devalues our standard of living, since wages are suppressed, instead of inflating along with the valur of our dollar. What I am talking about is that we have a PUBLIC bank, which can issue currency at no cost, at a reasonably determined rate, instead of the majority of it being printed by private banks which demand repayment. Regardless of whether it is a private or public bank issuing currency, inflation results. The fact that private industry can create money out of thin air (please learn what fractional reserve banking is before responding to this post so you understand what is being discussed here) is absolute lunacy. At least if it were controlled by the Bank of Canada, which was created specifically for this purpose, we might have a fighting chance at keeping inflation down, as the BOC has no incentive to overprint money, seeing that there is no profit from creating money out of thin air. Please think about this, as you aren't fully understanding what is being said here, watch that video, then do some independant research on this subject. It is actually ILLEGAL for private banks to issue currency in Canada, the fact that 98% of our money comes from private interests is completely insane.

[FOWL]

There, you have a pretty good grasp on the subject django. The video links to a whole series on the subject, and that one is merely a primer on the issue. The whole world operates on currency issuing banks that are privately held. Canada is one of the few nations in the world that actually has a public bank set up for this function, so it is rather depressing that in the past few decades, we have been robbed of this legal institution for managing our nations currency without incurring debt or inflation. It should be understood, that the capabilities of private banks to legally issue ten times the amount of credit they actually own in assets is what has caused the insane inflation we see globally. These banks can then legally create subsidiary branches who can issue ten times the amount of credit based on the holdings of their parent company and so on, equaling what is literally an infinite amount of legal money, which at any point can catch up to us making our dollar literally worthless. The amount of currency that is out there compared with the amount of actual resources and wealth when assessed makes the our dollar actually grossly overvalued at the moment, and a calling in of debts could completely bankrupt our whole society from the ground up. The first and most important step is to bring the issuing of our nation's currency back to the Bank of Canada, as is the law.

[ollie]

But what if you had so much money that you weren't going to do anything with the lent-out money anyway?

That never happens. Even a high interest savings account is doing something with the money. Besides, banks in Canada are public companies, and as such, are legally required to pursue growth at any cost that doesn't explicitly violate the law (one of many reasons, like all public companies, they find themselves continually in such compromising situations playing at the fringes and grey areas of law).

I was talking about Brad, not the banks.

[d_rawk]

Oops, sorry I'd thought that you were using Brad as a metaphor for the banks.

Still stands though, I guess. Brad has to do nothing at all for his money to earn just under 5% without any fear of volatility. Lending that out without compensation is a net loss, regardless of how much money he might have - he's always 'doing something' with it, even if it is just in the bank. Unless he has it stashed under the mattress, in which case the only thing he is doing with it is making for an uncomfortable sleep - and he'd better hope he doesn't have a fire.

Not to say that one shouldn't necessarily lend money out without interest .. maybe you still think of usury as a sin, maybe you're just a good guy, etc.. I'm pretty sure my sister saved my life one time many years ago with an interest-free $300 loan, but that's a whole story in itself.

It is well enough that people of the nation do not understand our banking and money system, for if they did, I believe there would be a revolution before tomorrow morning

[ollie]

Oops, sorry I'd thought that you were using Brad as a metaphor for the banks.

I just can't believe Brad would be so cutthroat.

Good point about the interest though.

[FOWL]

Of course procuring a loan from the bank (or anyone else for that matter) with interest is a required business practice, my issue is that banks are being allowed to issue credit they don't own. It is manufactured out of thin air, backed by nothing, and then they expect interest to be paid on imagination!

The real issue here is that 98% of all new currency issued in our society is "created" by private banks, issued through the federal government, and then tax payers must pay every cent of imaginary money, back with interest. This is why 92% of taxes paid go straight back to private banks, and serve no function for the Canadian public. There is no explanation for our government partaking in this illegal action other than proof that they are owned by the banking cartels.

[AD]

governments are owned by bank cartels?

do tell...

[FOWL]

http://www.youtube.com/watch?v=25yhygUkecE

Here is a good movie that addresses that among other very important issues. Well worth watching. The fact that governments allow private banks to issue their currency creating systems of spiralling national debt? Do you have an alternate explanation? Researching American history is one of the clearest documents of how the banking families have subjugated nations despited generations of resistance. There are excellent quotes from many American presidents as to how they were bamboozled. Studying what the Rothschilds did during the Napoleanic wars, financing both sides and buying up all of England is a good place to start as well. This is history. For Canadian specific information, research why the Bank of Canada in the seventies stopped issuing all of Canada's money. I'm sorry to report there is no other explanation for this.

[Biggest Fan]

Like myself still yet another internet econmics expert (ha ha) what fun. I guess there is room for another. One word government 'Expenditures'. Do you think it is really possible at this point for either of our governments to 'live within their means'.

[FOWL]

Without debt to private banks, we could have ten times the amount of social spending AND stay on budget. Of course much more preferable to me would be LET ME KEEP MY OWN MONEY YOU WASTEFUL WARMONGERING PIRATES!

[Birdy]

Easy boy!

[Biggest Fan]

#1 'Wasteful WARMONGERING Pirates' nice very nice.

#2 I thought that in order to be thought of as a Canadian you had to have 'socialist' leanings (ha ha). What is up with keeping your 'own money'. That is strictly an conservative American statement if I ever heard one. Watch out you might get yourself kicked across the border.

#3 FOWL welcome aboard. If this ship is big enough for me and my ideas there is plenty enough room for you.

[FOWL]

hahahha ya spot on!

I used to consider myself a socialist, except I hated our government, all parties, all stripes, and hated every government ever in the history of the planet. Hmmmmm.... it took me WAY to long to figure out "these people are at best incompetant morons, and at worst and FAR more likely, nefarious leeches on humanity. Why did I think they knew how to spend my hard earned money better than I do again? hahhaha a socialist who hates the government! Priceless! Youth is so quaint ain't it!?

[d_rawk]

hahhaha a socialist who hates the government! Priceless! Youth is so quaint ain't it!?

... but ... the video you posted (and the other 2 parts) all hinge on a national bank (ie: owned by the people), laments borrowing from private enterprise, is overtly sentimental for CNR and the type of Crown corporation that CNR represents in our public memory, is strongly in favour of ultra-liberal social spending ("we should want for nothing") not to mention a broad and organized method of determining distribution of that same spending, which is government.

The socialist thing is a bit of a gag around here. For my part, I tease myself with it, though to borrow from the (dreadfully dull) language that you find bandied about left-leaning circles in this part of the world I'm more "social-democrat" than "democratic-socialist". You, too, sound as though you are in favour of a rich public infrastructure .. I'm confused by why you then distance yourself from that based on your experience of representation. Run for office then. The 'government' is composed of the people who bothered - that it should mostly be opportunistic people (aka. 'nefarious leeches') who do so shouldn't be surprising. Opportunistic nefarious leeches are generally more motivated than the rest.

[FOWL]

Well I am not an anarchist. I believe governments COULD be useful for some functions, the issuing and managing of currency (not where it goes, simply the rate at which it is printed) is essential. Infrastructure such as roads, sewage, various other tasks I believe are best handled by a government. Although I also believe in a FREE country, you have the option to buy land, detatch from the grid, and lead a self sustaining lifestyle without being forced to pay into infrastructure. My main issue and purpose of this thread though is the fact that over 90% of our tax dollars go to a debt we have no say in, and get absolutely nothing out of. This is a major problem, and illegal to boot.

[FOWL]

Actually, to further my response, if it is okay for private banks to create currency out of thin air backed by nothing, then I as well should be able to issue my own currency. The problems inherent in that should be obvious.

[bradm]

private banks..create currency out of thin air backed by nothing

FOWL (and others), I wonder if you could comment on an idea I've had, namely that a bank loan is typically repaid with money that was earned by adding value to things; it's as if a person's efforts over time get translated into value that's added to a product or service, with that value exchanged for currency, which is then paid back to the bank, after which it goes into circulation in a slightly expanded economy, with the expansion of the amount of currency in the economy exactly in proportion to the expansion of the value that's been added to the economy.

It seems that, in a bigger picture, banks are not creating currency out of nothing, they're just issuing the currency earlier than its value has been added to the economy.

Aloha,

Brad

[TomFoolery]

Hey FOWL,

Printing money that is not tied to a commodity does not produce inflation.

I think if you look at the BoC's policy since the late 80s recession, you'll find that the BoC has explicitly followed (successfully, mind) a policy of low inflation. They've done so aggressively at the expense of periods of slow growth.

All this while maintaining a currency that is backed by nothing but a single phrase printed on our hard currency.

"This note is legal tender"

This is truly the beauty of our currency. It is elegant and effective.

While I fully appreciate "alternative" sources of information in assisting critical thought. I suspect you are relying on it at the exclusion of any "traditional" sources.

There are plenty of problems with the banking system and I believe that the ethics of 1st world debt to 3rd world countries is a big problem for development and global equity. However, you would not be typing this post on your fancy computer without the benefits of international debt trading.

I believe you have an insufficient grasp of the mechanics of banking to back up your complaints. I'm not meaning to insult you. I've gone on similar rants about things I don't fully understand. I just think you should round out your study of banking in published and peer reviewed books rather than watching youtube videos and talking with a bunch of pundits on a discussion board.

$0.02

Btw, Bradm - what you are describing is the entire purpose of banks. To facilitate growth.

Edited March 2, 2008 by Guest

[phishtaper]

informative post, Tom. and interesting posts from everyone else too.

i must admit that although I work with a lot of (Health) Economists, Ive never understood the stuff.