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Forum Post: The current system is not "Self-Correcting"

Posted 1 year ago on March 3, 2013, 2:30 p.m. EST by ProblemSolver (79)
This content is user submitted and not an official statement

Here is why :

  • The government sells bonds to pay off it's debts.

  • How are bonds purchased? From money that is already in circulation.

  • As bonds are sold, the debt increases. The money recieved from the sale of bonds is redistributed back into circulation. This does not increase the amount of money in circulation, but does increase the size of debt.

  • As the size of debt increases more bonds are sold to cover debt interest. Again money is taken out of circulation to purchase bonds and than redistributed back into circulation. And again, the debt increases but the money in circulation does not increase.

  • This is a run away system .. as with each bond-sale cycle the debt increases but the amount of currency in circulation remains the same. Placing a heavy burden on the tax payer to pay the ever increasing debt interest ..with the same amount of taxable resources..

  • This system is not self correcting.

  • Governments should not be allowed to sell bonds.

  • if Governments need money taxes should be their only resource, or the printing out of thin air method can be used.

  • Yes , printing out of thin air in this system will create inflation.

Inflation is good for those locked into debt.

Here is why:

  • When locked into debt, your payments remain the same, but as inflation increases , so do wages . Therefore, as your wages increase and your payments remain the same , the debt ratio burden is reduced. If you were earning $50 per day when you went into debt and your payments were $10 per day .. and now with adjusted inflation and wage increase you earn $100 per day but your payments locked in at $10 per day , inflation actually eases the streess load of your payment.

26 Comments

26 Comments


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[-] 4 points by OTP (-203) from Tampa, FL 1 year ago

Wages never keep up with inflation. Hence this pathetic level of 7.35 right now.

When I started out in construction in 1995 at age 15, I was started at $7. And the average starting wage was around $10. Today, the average pay for someone who just hopped on board is around $10.

Meanwhile food has doubled, rent is way up, utilities have nearly tripled.

The rich are able to take advantage of inflation at a much great rate than the poor.

[-] 2 points by factsrfun (6867) from Phoenix, AZ 1 year ago

The system is indeed unbalanced and will fly apart as there are forces working in the direction of wealth concentration that are not opposed currently. The evidence of this can be seen in this YouTube:

https://www.youtube.com/watch?feature=player_embedded&v=QPKKQnijnsM#!

I do feel the problem is larger than just the bond market, and the issue of bonds to build roads makes sense to wage wars doesn't, it's the same concept as not borrowing on your house to buy a car, don't take on debt that outlives the asset, wars are like dinner they must always be paid for with current income or you are going to get into trouble, anybody who ever charged too many nights out knows that.

[-] 1 points by ProblemSolver (79) 1 year ago

Thanks for the video.

The 1% have 40% of 54 Trillion.

40% of 54 trillion = 21.6 trillion.

Yes , the top 1% can pay off the national debt.. with room to spare.

[-] 2 points by factsrfun (6867) from Phoenix, AZ 1 year ago

Yep, it's a bunch of crap that "We're broke" the truth is we have never been richer in America. Did you see the Dow just set a new all time high we are loaded in cash, we are only poor in political will to pay the bills.

[-] 0 points by ProblemSolver (79) 1 year ago

Yep, I seen that. More profits making there way to the top.

[-] 2 points by jrhirsch (4714) from Sun City, CA 1 year ago

Real wages (already adjusted for inflation) have remained flat for the low to mid level workers for the past 40 years. So those locked in debt still can't get out.

http://en.wikipedia.org/wiki/File:US_productivity_and_real_wages.jpg

The idea that inflation is good is a deception. It's the major cause of the wealth gap. When people don't know the value of money, because it's constantly rising, those who do know it's value will take advantage of those who don't.

[-] 1 points by ProblemSolver (79) 1 year ago

I know ..

Here is another small example:

If you bought a car on paymrnts of $10 per day , and you earned $50 per day . The payments for your car would consume 20% of your daily earnings.

If you receive a raise due to inflation and now earn double , @ $100 per day .. your car payment would now only be 10% of your daily earnings ..

no deception ..

[-] 2 points by jrhirsch (4714) from Sun City, CA 1 year ago

Does anybodies salary double due to inflation in the 5 year period of an auto loan? Do you really think the auto seller doesn't understand interest rates better than the buyer does?

[-] -1 points by ProblemSolver (79) 1 year ago

.. uh well the elites double their salary every year ! lol

But , a 25 year mortgage ..surely your wage would double .. does the mortgage payment also double ?

[-] 4 points by jrhirsch (4714) from Sun City, CA 1 year ago

I have a 30 year mortgage with a bank. During the first 20 years almost all of the mortgage payment went to pay interest on the principle, with just a small portion of it to pay down the principle.

Since most people sell their house and buy another before the 30 years is up, the bank barely pays down the principle. On a $100,000 loan after 10 years of regular payments, the house buyer might still owe more than $90,000, even though he's made well over $20,000 in mortgage payments. The banker wins.

The buyer doesn't start winning until the last 10 years when money has depreciated and most of the mortgage payment goes to pay down the principle and not interest.

I'm fairly certain that the banker understands mortgage interest over time more than the auto dealer and positive he understands it more than the average house buyer.

[-] 2 points by gsw (2687) 1 year ago

thirties and fifteens, on same house over 20 years, and owe more than ever, and no new kitchen.

At times feel like a chattel servant. Hopefully 12 more and I'll be done with it.

My kids can't attain even that level, on their income. I should have got them more interested in Making money, not.

[-] 2 points by jrhirsch (4714) from Sun City, CA 1 year ago

One more tidbit about home ownership. The investment side only keeps up with inflation. The capital gains tax paid when sold is really a sham since there was no appreciation in "real" dollars.

[-] 1 points by ProblemSolver (79) 1 year ago

The banker does not want to see sky rocketing inflation because the money owed to the bank would lose value. Even though the bank forecasts for inflation while calculating mortgage payments.. if inflation exceeds what they forecast , they lose out.

[-] 3 points by jrhirsch (4714) from Sun City, CA 1 year ago

As I stated before, most home loans don't make it to the full 30 year term. A 45 year old will move 2.7 more times in his lifetime on average. Not enough time to pay down a 30 year loan. The loan will be paid off early when he sells the house, and another will be taken out on the new home, starting the mostly interest/little principle payment cycle again where the bank really makes the bulk of their home loan profit.

[-] 3 points by beautifulworld (20509) 1 year ago

What you outline there is very important. The banks make out like bandits and when the house sells for less than it was bought for, all the risk falls on the poor homeowner.

[-] 3 points by jrhirsch (4714) from Sun City, CA 1 year ago

Whoever has the advantage in knowledge will usually take advantage of those who don't, no matter how hard they work. It's the key to wealth.

[-] 2 points by beautifulworld (20509) 1 year ago

That's true of all things. If we can get the American people to understand that their poor financial plight is not their fault, that they haven't failed in some way because they are in so much debt, that in fact, the economic system is set up to put them in that poor financial position they find themselves in, then maybe, just maybe they will wake up.

[-] 2 points by jrhirsch (4714) from Sun City, CA 1 year ago

I put Occupy related info up on Facebook a few times a week. Political, economic, civil liberty, and anti war topics. My family and friends rarely respond, and like most Americans continue to live in a bubble that refuses to see reality. One Great Aunt, an ardent liberal, is so mesmerized by Obama she can't see the unjust war he continues to wage. Another Aunt on the right says she supports the soldiers, but it never occurs to her to bring them home after 11 years of fighting.

I can remember as a kid watching the patriotic boasts of people living under dictatorial regimes and thinking how could they be so blind to believe the party propaganda. Today, I look at many Americans and painfully see the same distorted sense of patriotism enslave their minds.

Let's keep poking at that bubble they're living in. Eventually the sharp points we keep bringing to their attention will burst it and allow them to see reality.

[-] 2 points by beautifulworld (20509) 1 year ago

I have had many similar experiences, lol, but I do have one 75 year old Aunt who joined the Occupy Wall Street protest in her town in the fall of 2011, carrying placards and all, so hope springs eternal. Never give up!

[-] 2 points by jrhirsch (4714) from Sun City, CA 1 year ago

Good for your Aunt! When older people would honk or wave in response to our protests, it moved me more than any other group.

My brother was arrested during one of the Oakland Occupy events and I joined soon after. If not for that spark, I'm not sure if I would be involved now. Either way I'm not giving up.

[-] 1 points by beautifulworld (20509) 1 year ago

Nice. I give a lot of credit, a huge amount, to all the occupiers who slept in the occupations and to those who were arrested. They are the true heroes.

[-] 2 points by jrhirsch (4714) from Sun City, CA 1 year ago

It took a lot of courage to sleep in those tents. I don't personally approve of that type of tactic, but the response was dramatic, and without it, there would probably have never been an Occupy movement. My brother was one of those heroes.

[-] 3 points by OTP (-203) from Tampa, FL 1 year ago

Dont forget they are all insured as well, so any loss is collected..

Quite the racket, eh?

Me and you do that, we go to jail. They do that, and they get promoted and have lunch with the president.

[-] 3 points by beautifulworld (20509) 1 year ago

And, banks don't have to pay the real estate tax when they take a home in foreclosure, even if the homeowner was foreclosed upon for that very reason.

[-] 2 points by freehorseman (267) from Miles City, Mt 1 year ago

No state no bonds.And no wages do not keep up with inflation unless you work under a cola.Most workers do not.Also many credit contracts have variable rate increases again your assumptions are misleading.Also the state allows being "locked into debt".This is Tyrrany.

[-] 2 points by shoozTroll (17632) 1 year ago

WallStreet