The Financial System and Money Supply

Maria Thomas48 said:I honestly don't care what money is actually used for. All that matters to me is that it serves its purpose as a way to settle my bills. That's really it.

If you’ve taken a look at that XLS spreadsheet showing the association's profits, you'll see exactly why the payments end up getting stalled after a while.

Here’s why: The middleman sectors—those entities that exist solely to squeeze a little extra off the top for everyone else—are drying up. Eventually, they’ll just vanish because there won't be any indirect profit left to grab. It happens. One day the margins disappear and then suddenly, there's nothing left to facilitate.Next up are the ones who aren't making much money. Because business has dried up, they’re sliding into the red and struggling to stay on top of their bills. Since even the companies already in the hole haven't been hitting their tax obligations to the government, this drop in revenue means the new loss-makers are falling behind on taxes too. It all circles back to the same thing—the government ends up seeing a dip in tax revenue, which shows up as them pushing back payment deadlines for services and products ordered by the state.

It’s the same thing that happens when credit expansion hits a wall. Loans stop growing. Those companies that were once pure sellers suddenly find themselves without any business at all, and they start operating at a loss. You know how the rest goes. It’s like that whole story about the housing contractors who were making money left and right. I'll get to that. Once the loans have to be paid back, there’s less work available because those construction crews aren't out there spending money on anything else anymore. It reminds me of back during the big highway expansion era. Remote parts of the Midwest were absolutely booming during those years. Money was just flying everywhere. Everyone was winning.

People always seem to miss the connection between prosperity and a steady influx of new capital. It’s a simple equation, really. If you can't link the two, then you're just ignoring how things work. Without that constant flow of new money coming into the system, you have to expect stagnation. In fact, it's more than that. You should pretty much count on the whole society regressing. It's just basic logic.

You can pretty much model all of that in a spreadsheet if you want to. But in a real American community, we’re dealing with imports that constantly drain our cash flow, not to mention the inflation we basically import from overseas—like how fuel prices spike and then drag every other price up with them. It just speeds everything up and makes the whole situation worse.

The whole idea that inflation actually drives economic growth? It’s not exactly right. There's definitely a connection there, I guess, but there are consequences too. It's complicated like that. People still don't get it. You can't just conjure up money to cover inflation out of thin air. It only comes from credit. That's just how it works.You could basically compare this kind of inflation that drives the economy to drugs. It makes you feel good in the moment, sure, but it eventually leads you straight to ruin.Nobody can actually fuel inflation through debt because the total amount of debt just grows by the sum of the interest rates and the inflation rate itself. It's basic math.The real debt is definitely climbing faster than the bank interest rates, and inflation isn't doing anything to offset that. If you look at an Excel spreadsheet tracking inflation-adjusted debt, the math is right there. Say you're looking at 4% inflation and a 7.5% interest rate; that means your debt is actually growing by 11.5% annually relative to the money supply. You can't just pay that back with standard currency. Over a typical 20-year stretch, the debt eventually outpaces the initial money supply in terms of real value. It’s just how it works.

It’s also about that 4% chunk of cash. Sure, the value might have climbed slightly, but now those funds are just sitting there, frozen. You need that liquidity to keep things moving through the system. Honestly, inflation is really the only thing that triggers these payment bottlenecks once it starts piling up over the years. It’s basically just mathematical induction playing out in real time. Can I function without that 4%? Yeah, I can. So, shave off another 4%. Still fine. And another 4%... I can still manage. But eventually, you hit a wall where you just can't anymore. That’s when the crisis actually hits. Suddenly, there's no money left. Payments get delayed, solid companies start folding, people lose their jobs, loans go unpaid, and everything just breaks down.

It all gets paid back during credit expansion—you know, the inflation, the import surges, those terrible investments, all that stuff. Then, once the credit expansion finally hits a wall and stops, everything just surfaces at once. Everyone acts like they’re caught completely off guard, staring around like total idiots. They start asking, "Wait, what happened? We were doing so well just a second ago."

So, there it is. That’s basically why the payments are stalled. It all comes down to the cash flow drying up.

It all boils down to where the money is coming from. You see plenty of posts on this site covering that exact topic. Once those revenue streams dry up, we’re looking at a total crisis..

Hey there.

I was looking through this site about the financial system earlier. It’s interesting stuff. Very technical. A lot of points on how everything connects. I think there's some value here if you actually take the time to sit down and read through the layers. Most people just skim over these kinds of things, but there's a certain logic to it once you get past the initial complexity. It's all very straightforward if you don't overthink the mechanics. Just a lot of data to process. Definitely worth a look for anyone trying to wrap their head around how the money moves.
Profit_community.xls

With all due respect, your theory isn't quite hitting the mark.

Could you walk me through what you mean by Equation 3? To be honest, the math following it is a bit murky; it would benefit from some clearer exposition... I stopped reading shortly thereafter.

The fundamental issue lies in your premise. You seem to be operating under the assumption that total income must equal total expenditure—essentially the sum of private consumption, investment, and government spending. However, this doesn't imply that the economy functions as a zero-sum game. Real income is derived from the creation of new value. At its most basic level, we have to eat, which means we must produce food through our labor just to survive. If we followed your logic, half the population would effectively starve in the first year, because for one group to show a "profit" in resources, the other would necessarily have to absorb the loss.😁

Do you see my point? An individual generates a specific amount of value through their work, which constitutes their income (Y). From there, only three things can happen with that value:
the individual spends it on consumption (C).
the individual deposits it into a bank as savings, which the bank then lends out for investment (I), or they invest it themselves if they are an entrepreneur.
they pay it to the government via taxes, and the state then handles the spending (G) on their behalf.
That is the underlying logic of the Y = C + I + G formula (for a closed economy; if you factor in imports and exports, you simply add the net export differential to the right side of the equation). We are talking about actual newly created value, rather than just shifting existing wealth from one pocket to another (as you suggest happens when losers fund those making a profit).

That is precisely what he ignores. He relies on a mathematical formula spanning twenty years, yet completely disregards any newly emerging values. To him, those variables equal zero. Consequently, his model fails to account for reality; according to his logic, the system should have collapsed ten years after its inception—somewhere around 5000 BC. But it didn't. It survived. Even today, it remains operational. How can he express such bewilderment that the system still functions when his own mathematics dictated its demise? We attempt to explain the discrepancies to him, but it is like talking to a brick wall. There is simply no way to make him see reason.

Regardless, he is merely one lost soul. For ages, he will continue to shout, "It should have failed!" And perhaps some people will believe him. However, practice will always dictate the truth, no matter how loudly he cries out. As for me, I am still paying my bills in US dollars, managing my savings, loans, interest rates, and inflation. Everything continues to function perfectly. No matter how much he shouts.

Gregory Williams7 said:That is precisely what he ignores. He relies on a mathematical formula spanning twenty years, yet completely disregards any newly emerging values. To him, those variables equal zero. Consequently, his model fails to account for reality; according to his logic, the system should have collapsed ten years after its inception—somewhere around 5000 BC. But it didn't. It survived. Even today, it remains operational. How can he express such bewilderment that the system still functions when his own mathematics dictated its demise? We attempt to explain the discrepancies to him, but it is like talking to a brick wall. There is simply no way to make him see reason.

Regardless, he is merely one lost soul. For ages, he will continue to shout, "It should have failed!" And perhaps some people will believe him. However, practice will always dictate the truth, no matter how loudly he cries out. As for me, I am still paying my bills in US dollars, managing my savings, loans, interest rates, and inflation. Everything continues to function perfectly. No matter how much he shouts.

The system is extremely stretched right now. And by "extremely," I mean critically overextended. Loans were handed out like candy to people who had no business taking them. Look at the Greece bailout: the Federal Reserve is preparing 90 billion euros! It's a precedent that paves the way for bailouts for much larger debtors like Italy and Spain.
The IMF has lined up 500 billion dollars. Greece is contributing 2.5 billion of that. All in all, this is inflationary for the EU, even if it doesn't hit as fast as it did in the USA.
In that regard, Ben Bernanke and the Federal Reserve are becoming increasingly hard to follow regarding gold purchases, now that the patterns are obvious. Regarding inflation in the USA, American media is already spinning it as a positive move for the country, and it looks like they're planning to introduce a VAT.
So, while things seem to be working for some, they aren't working here. Energy costs have spiked, many companies are looking to move production to Mexico, jobs are disappearing, and the budget is questionable, to say the least. For instance, the FAA took a 100 million euro loan from Hyp. Just one state entity is taking on debt almost as fast as Eric Dickerson. What you’re describing might work under reasonable circumstances, but here, the weak links are starting to snap. Nostradamus actually has a point. If the Eurozone continues with these bailouts, the standard of living—specifically the purchasing power of the euro—will drop within the next year or two.

casuallynx8 said:With all due respect, your theory isn't quite hitting the mark.

Could you walk me through what you mean by Equation 3? To be honest, the math following it is a bit murky; it would benefit from some clearer exposition... I stopped reading shortly thereafter.

The fundamental issue lies in your premise. You seem to be operating under the assumption that total income must equal total expenditure—essentially the sum of private consumption, investment, and government spending. However, this doesn't imply that the economy functions as a zero-sum game. Real income is derived from the creation of new value. At its most basic level, we have to eat, which means we must produce food through our labor just to survive. If we followed your logic, half the population would effectively starve in the first year, because for one group to show a "profit" in resources, the other would necessarily have to absorb the loss.😁

Do you see my point? An individual generates a specific amount of value through their work, which constitutes their income (Y). From there, only three things can happen with that value:
the individual spends it on consumption (C).
the individual deposits it into a bank as savings, which the bank then lends out for investment (I), or they invest it themselves if they are an entrepreneur.
they pay it to the government via taxes, and the state then handles the spending (G) on their behalf.
That is the underlying logic of the Y = C + I + G formula (for a closed economy; if you factor in imports and exports, you simply add the net export differential to the right side of the equation). We are talking about actual newly created value, rather than just shifting existing wealth from one pocket to another (as you suggest happens when losers fund those making a profit).

The equation is correct. It's backed up by an Excel spreadsheet on closed community profitability. There aren't any errors or bad moves in the derivation. No amount of moving the goalposts changes that. Even Dirk Krueger uses this exact same derivation with standard economic symbols in his book "Macroeconomics"—page 29. The link to the Excel file and the PDF was shared earlier.

I'm just following the logical conclusions. And naturally, the conclusions aren't exactly pleasant.

Best,

Gregory Williams7 said:That is precisely what he ignores. He relies on a mathematical formula spanning twenty years, yet completely disregards any newly emerging values. To him, those variables equal zero. Consequently, his model fails to account for reality; according to his logic, the system should have collapsed ten years after its inception—somewhere around 5000 BC. But it didn't. It survived. Even today, it remains operational. How can he express such bewilderment that the system still functions when his own mathematics dictated its demise? We attempt to explain the discrepancies to him, but it is like talking to a brick wall. There is simply no way to make him see reason.

Regardless, he is merely one lost soul. For ages, he will continue to shout, "It should have failed!" And perhaps some people will believe him. However, practice will always dictate the truth, no matter how loudly he cries out. As for me, I am still paying my bills in US dollars, managing my savings, loans, interest rates, and inflation. Everything continues to function perfectly. No matter how much he shouts.

Sure, there is new value being created. But at the same time, money is losing its punch because of this endless cycle of credit expansion that just devalues everything. Plus, you can't ignore how much people are just driven by pure greed for cash.

Best,

Maria Thomas48 said:The equation is correct. It's backed up by an Excel spreadsheet on closed community profitability. There aren't any errors or bad moves in the derivation. No amount of moving the goalposts changes that. Even Dirk Krueger uses this exact same derivation with standard economic symbols in his book "Macroeconomics"—page 29. The link to the Excel file and the PDF was shared earlier.

I'm just following the logical conclusions. And naturally, the conclusions aren't exactly pleasant.

Best,

Hold on a second—are you operating under the assumption that everyone eats, and therefore everyone consumes a specific amount of food over the course of a year?

Page 29 focuses on investments and depreciation, doesn't it? I'm struggling to see how that relates to what you're claiming.

Furthermore, you still haven't actually explained your own formula. Simply stating "the equation is correct" is hardly the same thing as providing an explanation. 😁

casuallynx8 said:That isn't quite right. The real interest rate is the difference between the nominal interest rate and the inflation rate, rather than their sum. To use your own example, the real interest rate you are paying on a loan would be 7.5 - 4 = 3.5%, not the 11.5% you suggested.

Consequently, if you borrowed $333 at a 7.5% interest rate, you would owe $358 after one year. However, if an item that cost $333 at the moment the loan was taken requires $347 to purchase by the time you repay, then the real profit your creditor realized is merely 35, not $25.

It is much like how, in decades past, one could settle certain debts for the price of a pack of cigarettes; under your logic, such a feat would be impossible.

Furthermore, I struggle to see how, according to your reasoning, anyone manages to repay any debts or loans at all.😁

Well, I was naive enough to think that too. That logic works for a standard loan, but it doesn't apply to inflationary debt. I mentioned this earlier, so just go back and read it.

In short. My starting point is the assumption that you're trying to maintain purchasing power by taking out a loan. You can't actually pay the loan back because you need that money to maintain your purchasing power. It’s not entirely accurate in a real-world system, though, because as we drive more expensive cars, we need more money in circulation since they aren't built to last as long. Economists can probably analyze that better than I can. I just made the simplest assumption that you're holding onto the status quo and keeping your real purchasing power exactly the same.

I plugged this into an Excel sheet and soon realized that debt tends toward the sum of inflation and interest over time.

There isn't some complex mathematical derivation here; it's easy to work out. Just look at the spreadsheet. I know it looks like a disaster for everyone, but we have to face the facts and say: This is the truth.

The Federal Reserve didn't give me any answers on this topic at all. They don't seem to care about the consequences of inflation.

Based on the Federal Reserve's own charter and laws, the only new money entering the system is credit. Period. Which means we feed inflation through credit. I just calculated what happens next.

Best,

You’re more than welcome to plug whatever numbers you like into your NYSE spreadsheet, but when you start drawing conclusions from them, please try not to disregard empirical reality. The historical fact is that humans have lived in organized societies for thousands of years, and over the last two and a half centuries—ever since the first Industrial Revolution—we have seen a relatively steady upward trajectory in living standards. Any theory suggesting this isn't possible is, quite frankly, demonstrably flawed.

Genuine growth implies that we are creating an increasing amount of value every single year. Logic dictates that there must be a corresponding increase in the money supply used to facilitate those exchanges. That is precisely what happens: the Federal Reserve creates money "ex-nihilo." While it is true that this capital enters the system through credit, the interest earned doesn't just sit there; it flows back to the government. This is how fresh liquidity is injected into the system.

Maria Thomas48 said:Well, I was naive enough to think that too. That logic works for a standard loan, but it doesn't apply to inflationary debt. I mentioned this earlier, so just go back and read it.

In short. My starting point is the assumption that you're trying to maintain purchasing power by taking out a loan. You can't actually pay the loan back because you need that money to maintain your purchasing power. It’s not entirely accurate in a real-world system, though, because as we drive more expensive cars, we need more money in circulation since they aren't built to last as long. Economists can probably analyze that better than I can. I just made the simplest assumption that you're holding onto the status quo and keeping your real purchasing power exactly the same.

I plugged this into an Excel sheet and soon realized that debt tends toward the sum of inflation and interest over time.

There isn't some complex mathematical derivation here; it's easy to work out. Just look at the spreadsheet. I know it looks like a disaster for everyone, but we have to face the facts and say: This is the truth.

The Federal Reserve didn't give me any answers on this topic at all. They don't seem to care about the consequences of inflation.

Based on the Federal Reserve's own charter and laws, the only new money entering the system is credit. Period. Which means we feed inflation through credit. I just calculated what happens next.

Best,

You keep actual purchasing power steady through salary negotiations that factor in inflation. People don't just go into debt to stay even—that assumption is flat-out wrong. Go look into some recent breakthroughs in behavioral economics— http://en.wikipedia.org/wiki/Behavioral_economics

Purchasing power is basically real wages divided by the aggregate price level. Taking out a loan is just an intertemporal shift. From a purchasing power standpoint, it's neutral because paying back that debt eats into your future disposable income.

Bottom line—http://www.getobjects.com/Components/Finance/TVM/concepts.html
Go study Time Value of Money concepts used in finance management.

Maria Thomas48 said:Well, I was naive enough to think that too. That logic works for a standard loan, but it doesn't apply to inflationary debt. I mentioned this earlier, so just go back and read it.

In short. My starting point is the assumption that you're trying to maintain purchasing power by taking out a loan. You can't actually pay the loan back because you need that money to maintain your purchasing power. It’s not entirely accurate in a real-world system, though, because as we drive more expensive cars, we need more money in circulation since they aren't built to last as long. Economists can probably analyze that better than I can. I just made the simplest assumption that you're holding onto the status quo and keeping your real purchasing power exactly the same.

I plugged this into an Excel sheet and soon realized that debt tends toward the sum of inflation and interest over time.

There isn't some complex mathematical derivation here; it's easy to work out. Just look at the spreadsheet. I know it looks like a disaster for everyone, but we have to face the facts and say: This is the truth.

The Federal Reserve didn't give me any answers on this topic at all. They don't seem to care about the consequences of inflation.

Based on the Federal Reserve's own charter and laws, the only new money entering the system is credit. Period. Which means we feed inflation through credit. I just calculated what happens next.

Best,

That assumes velocity of money is constant. It isn't.

Maria Thomas48 said:Well, I was naive enough to think that too. That logic works for a standard loan, but it doesn't apply to inflationary debt. I mentioned this earlier, so just go back and read it.

In short. My starting point is the assumption that you're trying to maintain purchasing power by taking out a loan. You can't actually pay the loan back because you need that money to maintain your purchasing power. It’s not entirely accurate in a real-world system, though, because as we drive more expensive cars, we need more money in circulation since they aren't built to last as long. Economists can probably analyze that better than I can. I just made the simplest assumption that you're holding onto the status quo and keeping your real purchasing power exactly the same.

I plugged this into an Excel sheet and soon realized that debt tends toward the sum of inflation and interest over time.

There isn't some complex mathematical derivation here; it's easy to work out. Just look at the spreadsheet. I know it looks like a disaster for everyone, but we have to face the facts and say: This is the truth.

The Federal Reserve didn't give me any answers on this topic at all. They don't seem to care about the consequences of inflation.

Based on the Federal Reserve's own charter and laws, the only new money entering the system is credit. Period. Which means we feed inflation through credit. I just calculated what happens next.

Best,

Yeah, we can. 🙂

Maria Thomas48 said:Well, I was naive enough to think that too. That logic works for a standard loan, but it doesn't apply to inflationary debt. I mentioned this earlier, so just go back and read it.

In short. My starting point is the assumption that you're trying to maintain purchasing power by taking out a loan. You can't actually pay the loan back because you need that money to maintain your purchasing power. It’s not entirely accurate in a real-world system, though, because as we drive more expensive cars, we need more money in circulation since they aren't built to last as long. Economists can probably analyze that better than I can. I just made the simplest assumption that you're holding onto the status quo and keeping your real purchasing power exactly the same.

I plugged this into an Excel sheet and soon realized that debt tends toward the sum of inflation and interest over time.

There isn't some complex mathematical derivation here; it's easy to work out. Just look at the spreadsheet. I know it looks like a disaster for everyone, but we have to face the facts and say: This is the truth.

The Federal Reserve didn't give me any answers on this topic at all. They don't seem to care about the consequences of inflation.

Based on the Federal Reserve's own charter and laws, the only new money entering the system is credit. Period. Which means we feed inflation through credit. I just calculated what happens next.

Best,

Real purchasing power depends on a whole bunch of other stuff—wages, productivity, etc. Your premise is stupid. Bad premise = bad model.

Maria Thomas48 said:Well, I was naive enough to think that too. That logic works for a standard loan, but it doesn't apply to inflationary debt. I mentioned this earlier, so just go back and read it.

In short. My starting point is the assumption that you're trying to maintain purchasing power by taking out a loan. You can't actually pay the loan back because you need that money to maintain your purchasing power. It’s not entirely accurate in a real-world system, though, because as we drive more expensive cars, we need more money in circulation since they aren't built to last as long. Economists can probably analyze that better than I can. I just made the simplest assumption that you're holding onto the status quo and keeping your real purchasing power exactly the same.

I plugged this into an Excel sheet and soon realized that debt tends toward the sum of inflation and interest over time.

There isn't some complex mathematical derivation here; it's easy to work out. Just look at the spreadsheet. I know it looks like a disaster for everyone, but we have to face the facts and say: This is the truth.

The Federal Reserve didn't give me any answers on this topic at all. They don't seem to care about the consequences of inflation.

Based on the Federal Reserve's own charter and laws, the only new money entering the system is credit. Period. Which means we feed inflation through credit. I just calculated what happens next.

Best,

http://en.wikipedia.org/wiki/Fisher_equation

*tap tap*

Maria Thomas48 said:Well, I was naive enough to think that too. That logic works for a standard loan, but it doesn't apply to inflationary debt. I mentioned this earlier, so just go back and read it.

In short. My starting point is the assumption that you're trying to maintain purchasing power by taking out a loan. You can't actually pay the loan back because you need that money to maintain your purchasing power. It’s not entirely accurate in a real-world system, though, because as we drive more expensive cars, we need more money in circulation since they aren't built to last as long. Economists can probably analyze that better than I can. I just made the simplest assumption that you're holding onto the status quo and keeping your real purchasing power exactly the same.

I plugged this into an Excel sheet and soon realized that debt tends toward the sum of inflation and interest over time.

There isn't some complex mathematical derivation here; it's easy to work out. Just look at the spreadsheet. I know it looks like a disaster for everyone, but we have to face the facts and say: This is the truth.

The Federal Reserve didn't give me any answers on this topic at all. They don't seem to care about the consequences of inflation.

Based on the Federal Reserve's own charter and laws, the only new money entering the system is credit. Period. Which means we feed inflation through credit. I just calculated what happens next.

Best,

*sigh*
Inflation isn't always just about money supply. Maybe try reading Samuelson before you start trying to "discover" major economic theories in an Excel sheet.

Maria Thomas48 said:Well, I was naive enough to think that too. That logic works for a standard loan, but it doesn't apply to inflationary debt. I mentioned this earlier, so just go back and read it.

In short. My starting point is the assumption that you're trying to maintain purchasing power by taking out a loan. You can't actually pay the loan back because you need that money to maintain your purchasing power. It’s not entirely accurate in a real-world system, though, because as we drive more expensive cars, we need more money in circulation since they aren't built to last as long. Economists can probably analyze that better than I can. I just made the simplest assumption that you're holding onto the status quo and keeping your real purchasing power exactly the same.

I plugged this into an Excel sheet and soon realized that debt tends toward the sum of inflation and interest over time.

There isn't some complex mathematical derivation here; it's easy to work out. Just look at the spreadsheet. I know it looks like a disaster for everyone, but we have to face the facts and say: This is the truth.

The Federal Reserve didn't give me any answers on this topic at all. They don't seem to care about the consequences of inflation.

Based on the Federal Reserve's own charter and laws, the only new money entering the system is credit. Period. Which means we feed inflation through credit. I just calculated what happens next.

Best,

brightlynx11 said:You keep actual purchasing power steady through salary negotiations that factor in inflation. People don't just go into debt to stay even—that assumption is flat-out wrong. Go look into some recent breakthroughs in behavioral economics— http://en.wikipedia.org/wiki/Behavioral_economics

Purchasing power is basically real wages divided by the aggregate price level. Taking out a loan is just an intertemporal shift. From a purchasing power standpoint, it's neutral because paying back that debt eats into your future disposable income.

Bottom line—http://www.getobjects.com/Components/Finance/TVM/concepts.html
Go study Time Value of Money concepts used in finance management.

That assumes velocity of money is constant. It isn't.

Yeah, we can. 🙂

Real purchasing power depends on a whole bunch of other stuff—wages, productivity, etc. Your premise is stupid. Bad premise = bad model.

http://en.wikipedia.org/wiki/Fisher_equation

*tap tap*

*sigh*
Inflation isn't always just about money supply. Maybe try reading Samuelson before you start trying to "discover" major economic theories in an Excel sheet.

I'm not going to respond to every single troll comment. That’s just not how I work. Here is the reality. Inflation means prices go up. Everyone understands that when they look at their own household budget. When products get more expensive, we can buy less with the exact same amount of money. Our purchasing power drops. It keeps dropping until we eventually find ourselves only able to afford the absolute bare essentials.

If you want to offset the drop in purchasing power, you have to increase income. If we’re talking about doing this at a community level, there simply needs to be more money in circulation. You can try selling people on those theories about velocity of money, but honestly, take that argument somewhere else. If that logic actually worked, we would never have crises, and besides, the money wouldn't even stay in circulation long enough for anyone to actually see it. Do you really think you can just ramp up the velocity by 3 or 4% every single year indefinitely? That’s an exponential function. At that rate, it would double every 17 to 23 years. It doesn't hold up.

To be blunt, the US doesn't have an export surplus to speak of, nor is there any kind of long-term investment coming in to bridge that gap. It's just not happening.

When you’ve got a massive amount of liquidity floating around because of credit expansion—plus all those other moving parts like inflation—you still have the resources to keep things running. A portion of that credit never actually gets paid back, which just keeps feeding the pool of circulating cash. It isn't a direct link, mind you, but more of an indirect connection. Honestly, if we hadn't relied on credit in the first place, we wouldn't be staring down these debts right now. The crisis would have hit us way sooner, too. Without that cushion, a shortage of foreign currency to pay for oil imports would have triggered an immediate collapse.

The Federal Reserve laws basically state that new money only enters the system through credit. That's just how it works.

So I put together this Excel sheet to track inflationary debt and realized something pretty straightforward. The total debt just keeps climbing because you're essentially adding up the interest on inflation plus the actual interest rates. It’s a cycle. You have to spend a portion of any new credit just to cover the new inflation, while the interest keeps piling up on top of what you already owe. You can't exactly pay the debt back, either. If you tried to wipe it out, you'd be draining the money supply entirely, and that would trigger a massive economic crisis.

You can see the proof in how things actually play out. When companies and banks get sold off, it injects fresh cash into the system, which basically gives the financial sector enough breathing room to handle those long-term payment cycles again. That credit expansion from the new bank owners, combined with all that investment into the interstate highway system, ended up padding the Federal Reserve's foreign exchange reserves and making imports much easier to manage. All that flood of cash coming from loans really jump-started the economy, and the idea was that it would eventually kickstart domestic manufacturing for export. But because the exchange rate was so favorable, nobody actually found it profitable to produce anything locally. Everyone just pivoted toward import businesses instead. That's just how it went.

Sure, that’s all just theoretical. In reality, we can see that every major industrial nation is drowning in massive debt, and they aren't actually paying it off—they're just piling it higher and higher. If your theory actually held water, at least 20% of countries would be in an incredible position right now. But honestly, the saddest part is that the most technologically advanced nations are the ones carrying the heaviest debt loads. I've pointed this out a few times before. Are we really supposed to act like fools and follow the lead of the Japanese for fifty years? It won't work. Hard work alone isn't going to solve a debt crisis like this; eventually, people will just be working just to put bread and water on the table. Everyone ends up in the same place in the end. Those who had everything will lose it all because of the debt, and those who started with nothing will stay exactly where they are.

What’s the common denominator for all these issues? Basically, if that one specific problem exists, you just get constant disruptions. It’s like the only way new money actually enters the system is through credit.

This whole "flexible monetary system" thing started being rolled out nearly a century ago, and now that it’s been spread to almost every country on Earth, it’s basically become the root cause of constant crises and debt slavery. People argue about it all the time. They claim a standard system might let inflation eat away at the money supply, but at least it doesn't trap everyone in a cycle of debt that’s impossible to work off. Some people try to make that point, but they clearly don't get that the old way actually worked here in the States until the mid-90s. When the Federal Reserve got its new mandate, it managed to keep the dollar and prices relatively "stable," sure, but it also paved the way for these catastrophic long-term consequences. It just turns out there wasn't anyone around back then with the guts to actually say it.

By the way, everyone who insisted my equations were wrong can go ahead and start attacking Professor Dirk Krueger too. He laid out the exact same thing for an open economy on page 27 of his book "Macroeconomics". He just fails to draw the necessary conclusions regarding the credit-based financial system specifically, and how inflation impacts the economy in that context. I wonder why that is.

To all those telling me I need more education: maybe try reading the Federal Reserve Act and the statutes of the European Central Bank first—which, by the way, will soon be our law. It’s the same reason I’m against joining the EU. We should only join once at least 70% of their current members aren't drowning in debt. Only a fool would jump into a group that's already struggling this hard with debt.

Best,

So, the U.S. Government has decided to monetize its debt. I suppose we'll get to see how that actually plays out...

Robert Vaughn10 said:So, the U.S. Government has decided to monetize its debt. I suppose we'll get to see how that actually plays out...

I honestly think the administration is just blowing smoke to squeeze out every last cent they can. They're just pretending to work on a solution. Sure, it’s fine that they're "trying" to shorten payment deadlines for suppliers. But there's a massive difference between actually shortening those terms and just claiming you're doing it.

The rest of it is just moving money from one empty pocket to another.

We still haven't gotten a straight answer: what actually caused this crisis, especially after everything seemed to be going so "well" for us? If we don't even understand the root causes—whether here in the States, in the European Union, or globally—then there’s really a slim chance we’re going to fix anything.

Best,

Everything I’ve pointed out regarding flaws in economics actually has a logical foundation.

You really should take a close look at the section in The Globalization Guide because it ties directly into the evidence I've laid out.

It fits perfectly with all my mathematical proofs.

Here is where they overlap:

"Basically, a single $100 bill issued by a central banker costs about 30 cents to produce, yet citizens are left holding a debt of $103—a debt that can never be repaid, even theoretically, because the bank only issues the principal and never the money required to cover interest payments." The Federal Reserve Act and the statutes of the Federal Reserve confirm this. It should also be noted that if there isn't enough money to generate earnings for the central bank, there certainly isn't enough to support the entire community.

"- By funding or directly owning business and economic schools, financing research, publishing works, hosting economic conferences, and providing direct payments to economists, they condition and restrict the general understanding of economics, its instruments, and specifically the relationship between monetary control and macroeconomic events." This is clearly visible in the responses from the Administration and the President's office.

"- They pass budgetary regulations that legalize unnecessary public borrowing from the banking cartel to fund government spending, while simultaneously approving tax levies." I have proven mathematically that this debt cannot be repaid without massive exports, which is a globally impossible mission for any nation.

"Fraudsters and thieves among top-tier global bankers, charlatans within university economics departments, workshops, thinkers, and intellectuals who provide logical cover in exchange for corruption—they all continue to insist that this fake version of a free market in a globalized world is perfectly fine and would have functioned flawlessly if governments hadn't interfered.
We see their sophisticated arguments and theses, which nobody else can truly grasp, appearing daily in the press, on television, and across digital media." This is my recent thought regarding the complicity of anyone who believes the current system provides prosperity (even though that can't be proven theoretically, statistically, or practically).

But what good is all the evidence if people lack the IQ to connect the dots and understand it?

Does anyone else honestly think this is all nonsense? What are we supposed to do? Does anyone actually believe the Administration will lead us out of this crisis without increasing debt? And debt itself is just a crisis generator due to interest payments.

I've brought everything down to earth and proved it with math. Greece serves as a practical example of this reality. We aren't far behind.

Right now, we're looking at electricity prices jumping by 13%, and that might just be the beginning. Remember, in this system, inflation doesn't just devalue money; it creates infinite debt over time. Once you get a chain reaction of price hikes for all goods and services combined with total cash shortages and high interest rates, you'll face crisis and anarchy. Tourists will start bypassing us like we're a war zone.

That is what's coming. And the administration keeps lying to us about the causes of the crisis and how to fix it. We can tighten our belts until we're unconscious, but it won't work because that isn't the way out. We urgently need an energy independence strategy. Apparently, the Russians are pulling oil from 7.5 miles depths where it should never have been found. We need to make agriculture capable of meeting our own food needs. Then, we need to work on amending the Federal Reserve Act to allow for real money emission through the budget, rather than making credit the only option. The value of the dollar is a whole other issue. We need to control imports—cancel those free trade agreements and write new ones that balance imports and exports. In that scenario, the exchange rate matters less because we'd be trading goods directly. Tourism would become pure export, instead of the current mess where we import food just to feed the tourists. We couldn't have made stupider decisions.
Joining the European Union should be put on hold until they fix these same issues within the EU. Anyone would do that within their own family, wouldn't they? What good is all that advanced imported technology if we're living like debt slaves?

The way this whole system is set up, there’s just no escaping the crisis. It’s built to trigger these crashes by its very nature. We need a total overhaul because the structure itself is the problem.

Does anyone actually have a better way forward—and I don't mean just some vague theory? What we really need is a concrete, actionable plan.

Best,

http://sites.google.com/site/financijskisustav/

Andrew Mellon once said regarding the Great Depression: "Liquidate labor, liquidate stocks, liquidate farmers, liquidate real estate… it will purge the rottenness out of the system." Honestly, that looks like the fastest way out for America too...

And you’re out here arguing against inflation, yet somehow claiming it's one of the things that would actually fix the crisis... :P

Larry Collins19 said:Andrew Mellon once said regarding the Great Depression: "Liquidate labor, liquidate stocks, liquidate farmers, liquidate real estate… it will purge the rottenness out of the system." Honestly, that looks like the fastest way out for America too...

And you’re out here arguing against inflation, yet somehow claiming it's one of the things that would actually fix the crisis... :P

I’ve already shared my thoughts on inflation in some of my earlier posts.

Inflation in our current system—where money only enters circulation through credit—is absolutely wrecking the economy. It’s pretty straightforward: if you want to maintain the same real mass, basically keeping purchasing power steady, then the total sum of inflation plus interest rates has to keep climbing against the money supply. If that doesn't make sense, just go back and look at that Excel sheet I posted earlier. That was just a projection, sure, but reality is hovering right around those numbers. We expect the real money supply to dip because people are going to tighten their belts and cut back on spending, but that can't last forever. Eventually, the only way forward is to let a larger volume of credit circulate to keep the money supply moving.

Once you finally move away from relying on credit as your primary source of cash, that’s when printing money starts driving inflation. And since we were always so reckless with our lending, it stands to reason we’ll be just as reckless when it comes to printing.

The secret to calculating an exact money supply that won't trigger inflation lies with those trained economists—the very same ones pretending they don't see exactly where the crisis is coming from. It’s actually pretty simple. In basic terms, primary money issuance should strictly match the total profits generated by all economic actors, like corporations and individuals. You also have to factor in losses, treating them as negative values. If our money expansion mirrors the expansion seen overseas, then we wouldn't be dealing with exchange rate issues. Of course, there's a catch: our profits have to be backed by an equal amount of actual labor. Take foreign banks, for instance. They rake in massive profits here in the States, while making significantly less back home. This essentially means they are devaluing the currency by extracting high profits without contributing much real work. We need to be rigorous about this. Anyone looking for a free ride—wanting the bread without doing the heavy lifting—needs to be cut off by deducting their assets. Greed has to be dismantled. I'm talking about the predatory lenders, the shady contractors, the highway construction outfits, and those lawyers with their outrageous billable hours. You can fight back against all of them by establishing state-owned enterprises that operate on legitimate profits rather than manufactured losses. When the rules of market competition start working in reverse, you have to use forced regulation to push things back onto the right track.

If we could just achieve a baseline level of independence when it comes to energy and food, we’d actually be headed in the right direction. It’s pretty simple. Being dependent on outside sources for energy—especially with a trade deficit like ours—is basically a fast track to a debt crisis. It’s inevitable. And honestly, the same logic applies to food security too. We need to be self-sufficient if we want to stay stable.

Are we really being that blind? It’s pretty simple when you think about it. We need energy and food, and we need them constantly. All this talk about planning becomes pretty much meaningless when we’re importing all our gas anyway. Honestly, it would be more realistic if Russia just footed the bill for our energy infrastructure, but then people would start asking questions like, "Wait, why is Russia setting up our gas lines?"

That’s something that really needs fixing. When you have cheap imports like that, they only look favorable on paper. It's not the full story. Let's be real here. Importing all this stuff without any actual reason? It’s just a massive waste of cash. We really need to be buying domestic products. Even if they have some foreign components mixed in there, they’re still better than just straight-up importing everything from overseas. It just makes more sense.

Every single import we make just piles more onto our debt. How? It’s simple. The Federal Reserve burns through foreign exchange reserves to manage things, and those reserves—along with private holdings—are exactly what allow us to pay off our debts. Just keep that in mind next time you're grabbing something made overseas. If you buy a domestic product, the "loss" is basically just the manufacturer's retained profit. But with an import? That loss is 100%. Think about it. That cumulative profit kept by a local maker is what ends up in long-term savings instead of being spent or reinvested. If that margin is around 5%, then buying an imported item at the same price is actually twenty times more damaging than buying something made here. I mean, if it took us 15 years to hit this crisis, focusing entirely on domestic goods would have stretched that timeline out to 300 years. Even the Romans had to deal with currency inflation of just a few percent to see that kind of impact.

Basically, an import only really makes sense if it's like 20 times cheaper than what we produce locally, assuming the quality is actually the same.

Best,

Look, Japan is basically proving what happens to 99% of nations because of this purely credit-based system. Their debt is sitting at 200% of their GDP.

I've been trying to get a hold of some big-name economists, but it always ends up at the same stage. They just say they'll look over the material and get back to me.

An article I wrote for my site was censored by the editors at a major US news outlet, so the link to the content is gone now.

Our unions are fighting over laws that honestly won't even be followed, especially since we know the whole system relies on credit, and there aren't any bigger credits coming down the pipeline. At the end of the day, regardless of what kind of law passes, the money simply won't be there. If the government spends less, they collect less in taxes. Massive austerity just leads to less money circulating, which means people can't earn higher wages, so you can expect that half-baked plan to shorten payment cycles to be a total disaster. They’d be much better off fighting to change the foundational law that pushes us all into crisis—the law governing the Federal Reserve that keeps money issuance strictly credit-based.

In the meantime, I've put together some extra readings over at http://sites.google.com/site/financijskisustav/home so everyone can find out the actual truth about how the financial system works.

While searching through various authors, I stumbled upon an author from Mexico named Stojan Nenedović who wrote a paper titled "non-credit money as a gift" http://noncredit-money.org/?cat=34&lang=en. For thirty years, people have tried to present this theory to the USA and Mexico, but it gets rejected. Even if his specific method for regulating money isn't perfectly clear and would face hurdles in real-world implementation, the main point is that there were thinkers decades ago—long before this credit system became part of our lives—who realized that non-credit money issuance is necessary.

And the main takeaways for that kind of non-credit issuance are actually quite interesting:

- lower inflation (since bank credit activity is the cause)
- lower production costs
- a more competitive economy without unnecessary interest burdens
- lower taxes (because the state's finances aren't weighed down by interest)
- higher employment and a stable economy
- etc.

A lot of people won't agree with this, but those same people won't admit that prosperity in a purely credit-based system is only possible for bankers and a tiny handful of winners.

Best,

http://sites.google.com/site/financijskisustav/home

Well, Secretary Šuker just made our day by approving a $2 billion loan. Meanwhile, the head of the Federal Reserve mentioned in a recent report that we need to tighten our belts, though he lacked the guts to admit that neither austerity nor taking out even larger loans will actually solve anything. That’s not really his job description, I suppose. He could have just been honest about it, but then he probably wouldn't be the Fed Chair for much longer.

A few months back, I figured out that we need over $2 billion in new capital every single year just to keep things running. And sure enough, the amount of debt we've taken on this year has already hit $2.5 billion. Sure, we spent some money paying down old debt, but fundamentally, the mountain of debt is just getting taller.

I caught Gust Santini on TV today. More than a month ago, I handed him clear, written evidence regarding this, but he doesn't use it when he goes on air. He just said we can keep borrowing as long as someone is willing to lend to us, but eventually, interest rates will spike, making further borrowing a total suicide mission. He didn't say anything else that I wouldn't have said myself. He also added that we absolutely need to focus on being export-oriented. I've said that's the only way out of this mess—assuming people actually start using their brains—but the man won't say what really needs to be done. Even when Slavko Kulić mentioned it recently on ABC. The US lacks an independent monetary authority. And the news anchor didn't even follow up with him on it. But hey, if you know, you know. Monetary authority is about the power to issue money. We basically just gave that up because we lack common sense.

So, here we go, following the Greek path. Only those who truly see the picture can recognize the small truths popping up in the media, but even those aren't enough for the masses to understand where the wind is blowing from or why.

In the meantime, everything is playing out exactly how I assumed it would. Businesses across all sectors are slowly sliding into losses and shuttering their doors. In a society without enough inflow of new money, those who are profiting can only do so at the expense of everyone else. And those other people can't endure it forever before they go bankrupt. Eventually, even the profitable ones won't be able to pull profits indefinitely. As the less profitable firms fall away, the profitable ones will be next in line.

I know from first-hand experience that a ton of companies are barely scraping together enough cash for payroll, and they're compensating for everything else through trades. Basically, they're generating turnover without actually using liquid cash. Some owners are already wondering how much longer they can hang on.

Long live economic ignorance.

sites.google.com/site/financijskisustav/home

I’ve been following your posts, and even as someone who isn't an expert, I find myself agreeing with quite a bit of what you're saying...

The part I can't quite wrap my head around, though, is what you actually suggest we do to fix this?
What do you think would be the absolute worst-case scenario here?
And why do you feel like people won't just "mutate" into something entirely different?

I did a little digging on my own regarding the Argentine Syndrome...

http://www.mojnovac.net/forumi/showthread.php?t=197

It seems like certain things just move in cycles. Honestly, we're all just slaves to the 21st century and there's really no way around it... People are just way too dependent on money these days, which explains why everyone panics so much during a crisis or when one is looming.

Of course, the first thing people fear is seeing their current standard of living drop—which, in the US right now, feels totally disconnected from reality due to the fallout from recent conflicts...

I know I can be a bit stubborn about these things, but as long as we have such a massive percentage of retirees who haven't even finished a full career, plus hundreds of thousands of disabled veterans and those serving our country, I'd say there is plenty of room for budget cuts here...

But I truly believe that we need to start by looking at ourselves first...

neonhound10 said:I’ve been following your posts, and even as someone who isn't an expert, I find myself agreeing with quite a bit of what you're saying...

The part I can't quite wrap my head around, though, is what you actually suggest we do to fix this?
What do you think would be the absolute worst-case scenario here?
And why do you feel like people won't just "mutate" into something entirely different?

I did a little digging on my own regarding the Argentine Syndrome...

http://www.mojnovac.net/forumi/showthread.php?t=197

It seems like certain things just move in cycles. Honestly, we're all just slaves to the 21st century and there's really no way around it... People are just way too dependent on money these days, which explains why everyone panics so much during a crisis or when one is looming.

Of course, the first thing people fear is seeing their current standard of living drop—which, in the US right now, feels totally disconnected from reality due to the fallout from recent conflicts...

I know I can be a bit stubborn about these things, but as long as we have such a massive percentage of retirees who haven't even finished a full career, plus hundreds of thousands of disabled veterans and those serving our country, I'd say there is plenty of room for budget cuts here...

But I truly believe that we need to start by looking at ourselves first...

The path to a solution is pretty straightforward.

If it's obvious that exporting is the only way out, yet that's impossible for the entire planet to sustain, then it’s clear evidence that the system itself is broken.

First, economists need to just throw their hands up, admit they've been wrong, and tell us the truth: they've been lying and misleading us for decades. This whole setup is a sham because new money is nothing more than credit.

Second. Once we finally accept that, we have to define how real money is going to be generated (primary budget issuance and specifically how much).

I wouldn't even bother looking at point two until point one happens. Any kind of money generation that isn't backed by actual labor leads straight to ruin through hyperinflation, and that's where you have to draw a hard line. Everything else—things like savings, streamlining administration, wiping out corruption and rigged contracts—is all valid, but it won't work without that first step. It's impossible otherwise.

That's really it. People need to understand exactly where new money comes from, why it holds value, and what causes it to lose that value. Until that level of awareness exists, nothing else matters. And this has to be driven by economists, politicians, and the media. But they won't do it because they prefer staying mindless and acting as servants to others.

Without non-credit money, our labor is essentially worthless. Or rather, we can only partially convert it into money (savings) which is actually just hiding someone else's massive debt.

The worst-case scenario is just aimlessly drifting along without an actual plan and dealing with the fallout. Unemployment, bankruptcies, bank failures, foreclosures on homes and property, strikes without a purpose, civil unrest, robberies, and so on. It's everything we saw in Greece. And Greece didn't truly recover. They just quieted down a bit. There will be more to come.

Regards

The system is just what it is. It was designed by some clever mind, but to me, it feels like seeing those same old pyramids just wearing different masks. I saw through the whole thing a long time ago... it’s always the same story, where the people at the very top of the food chain get to enjoy everything while everyone else watches.

I’d argue that this entire setup only really makes sense as long as there are enough resources spread across the globe to go around. We shouldn't kid ourselves thinking that countries like Germany or France wouldn't pull the trigger on a war if they suddenly ran out of the essential stuff they need to function. The USA has been doing exactly that for decades now, all while hiding behind the guise of fighting terrorism or responding to some kind of perceived threat...