Forum Post: The Fictitious Capital Pandemic Will Get Us in the End

The government is printing money and causing higher prices. I've been hearing that complaint since I was old enough to remember it. That means about 4-6 years old between 1950 to '52. Next it's said that the government debt and interest are a great concern.

Wait a minute. If the government is printing the money, why is their debt and who are we paying interest to? So what's really going on here? Is the FIRE sector creating money on their ledgers to buy government bonds? We know that savings deposits can't account for all the loans to government or everyone else. Very few of us have savings as we live from hand to mouth. Where does all the money that is loaned come from? Or did I already answer that? Is it being created on bank and credit industry ledgers as well as the interest on the loans, that hasn't been paid to the owner/investors?

Oh, you think it's investor money being loaned? Where does that money come from? Profits on real economic endeavors? That doesn't account for all the money created or the RE-LOANING (COMPOUNDING) OF INTEREST. There's a lot more debt than there is investment by material producers in credit "industries" or savings deposits. Profit from material enterprises are reduced by parasitic interest on debt. And when any profit from real industries is left to be invested in lending it becomes part of the financial (fictitious) capital that is the cancer destroying the economy. The interest on that profit compounds and the money grows exponentially, just like interest on any debt or the increases in real estate prices, which are really increases in mortgages and profits from them. So we still haven't answered whence comes all the money that's lent.

Each crash occurs when the bubble, mostly unsecured (by real material assets and production capacity) debt represented by stocks and bonds, bursts. A recovery, like that from the 2008 crash, that "recapitalizes" the banks but doesn't forgive the consumer debt and mortgages but instead allows the banks that have been reimbursed for their imprudent lending to continue to own the debt, charge interest and foreclose on defaulters. They have their cake and eat it too. And of course the real problem of fictitious capital that is the cancer killing the economy lives on. Eventually the ultimate crash will come, from which there is no recovery. The next crash was overdue when the Covid-19 hit. The Wall St. dive may have been a coincidence.

Aside: Production and job contraction are unnecessary when one of the ordinary cyclic FIRE Sector crashes occurs. It happens because the owner controllers are trying to protect their real assets when the imaginary assets of fictitious capital evaporate in the Wall St. "correction." So with the latest crash the attention is diverted to Covid-19, though real production and jobs would have suffered due to the financial panic anyway.

What are the mechanics of loan origination? This is how I understand it: the lenders enter debits on their ledgers and issue checks or other transfer vehicles to get the money to the borrowers. The checks are deposited in lenders accounts and credits are entered in their banks' ledgers. So the money has been created by the lenders and. because of the round robin, the books of most banks are still roughly balanced. The government issues bonds (which become part of the lenders assets) and uses the money to buy whatever and it's ultimately deposited in some bank.

If at the end of the day a lender is short, they borrow over night from the FED (a private bank) and it's credited on the ledger and debited in the morning when they pay it back. No where in this does the government print any money. Like us, they just pay interest on the money the lenders create to buy government bonds. And this merry go round has been spinning for thousands of years. Don't forget: the debt and money supply are also growing at the exponential rate of compound interest.

We blame it on the government. In a way, maybe that's appropriate. Instead of taxing the rich and their corporations, we borrow the money they create in our name from them and pay them interest on it. That's how they tax us in the world dominated by finance. For further insight, look up "Fictitious Capital." If you can choke down the nausea of confronting the existential reality of the conditioned mind you thought was your own, you might learn something. If enough of us wake up we might do something about the fraud we call the Capitalist Economy.

http://michael-hudson.com/2010/07/from-marx-to-goldman-sachs-the-fictions-of-fictitious-capital1/

https://michael-hudson.com/2018/05/creating-wealth-through-debt-the-wests-finance-capitalist-road/

Then there's outsourcing and the impoverishment and debt enslavement of the working class. When we can borrow no more to buy what we need to live in this low wage corporatist utopia, the great wheel that grinds us down will come to a stop. See "ultimate crash" above.

You see: The way real products we're supposed to consume to keep the grinder spinning are produced is only the latest gadget in the tool box of the exploiters. The abstract economy of Wall St. - The FIRE Sector - is the ruling parasite whose antecedents are elite classes that have been exploiting populations for 10,000 years or more in places. Compound interest is and has been for as long as we can remember the greatest threat to survival the human race has ever faced. Markets are our bane.