Is a debt-based monetary system compatible with oil depletion?
Yes
15%
[ 38 ]
No
84%
[ 202 ]
Total Votes : 240
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Message
Mircea Heavy Crude
Joined: May 04, 2007 Posts: 171
Posted: Sat May 05, 2007 12:53 pm Post subject: Re: Our Money System and Oil Depletion; Are they Compatible?
MonteQuest wrote:
MrBill wrote:
Economics is about the natural carrying capacity of a system and sustainable growth.
Then why have a fiat money system based upon and dependent upon infinite growth?
I think maybe MrBill meant to say a monetary system is about natural carrying capacity of a [macro/micro economic] system and sustainable growth.
MonteQuest wrote:
A debt-based money system most certainly is not sustainable.
Sure it is. However, I do agree with you insomuch as no monetary system can function if a small group of people are permitted to amass the majority of wealth.
I think you've probably seen statistics that say something to the effect that people 57 and older own/control 80% of the wealth in the US. That leaves everyone 57 and under fighting for the other 20% and obviously that kind of lop-sidedness is detrimental to any monetary system.
Your Hiltons, DuPonts, Kennedys, Rockefellers, Fords, Gates', Soros' ad infinitumad nauseum have amassed incredible empires, mainly by hoarding wealth. Neither you nor I gain an advantage from that.
What is needed is appropriate tax/public policy laws that allow people to amass wealth during their life-time, but then forces them to return the wealth back into the system at their passing, instead of handing it over to their children.
MonteQuest wrote:
And why do we allow externalized costs?
No one "allows" them. They exist, regardless of the type of economic system or monetary system. Even if you had a barter system, you would still have externalized costs.
The difference between every other species on Earth and humans is that humans are the only species that depletes natural resources.
I'm not sure you'd be very keen on roaming around in herds munching on tree leaves and feasting on an occasional dead human/animal carcass.
MonteQuest wrote:
Could capitialism even exist if we paid as we went? Don't think so.
Ah, now we see the problem.
You're confusing economic theory with economic systems. Capitalism is an economic theory, not an economic system. Capitalist theory posits that capital, ie the means of production, should be in the hands of private individuals/groups.
An economic system merely answers the 3 basic questions, of what shall be produced, how it shall be produced, and for whom it shall be produced.
In the Free Market system, aka the Market system, it is the market which answers those questions. The Market system is compatible with all economic theories, Capitalism, Socialism, Communism (although it hasn't been attempted yet), and other economic theories.
People who confuse Capitalism with the Market system, also seem to confuse free markets with open markets. They aren't the same.
Furthermore, people generally make the false assumption that Capitalists want free markets and like the free market system.
They do not.
Capitalists, historically, have always wanted open markets, because it is open markets that give them access to sell their goods/services.
Capitalists, historically, have always opposed free markets. The historical record is quite clear and convincing and the historical records always extends up until 1 second ago. You just have to go visit the FTC's website to see what actions are pending.
There are also several on-going actions by state attorneys general against milk suppliers who colluded to fix prices for the sale of milk and against other suppliers for collusion/price fixing.
Capitalists want access to all markets, and be able to set and control prices outside of the law of Supply & Demand, rather than allowing the market to set and control prices, or allowing a government or other group/oligarchy to set/control prices.
To answer your question, yes, Capitalism would still exist, and yes, the Market system would still exist if "we paid as we went."
The only difference is that the economy would not have grown as fast. There would be few, if any, two-income families/households, because there wouldn't be enough jobs existing to support that many workers in the economy.
Most of the economic growth over the last 20 years has been driven by the $1.3 TRILLION in credit card debt amassed by American consumers. If Reagan had not deregulated the banks in 1984 and credit cards had not proliferated, the word "Starbucks" would not be part of your vocabulary today.
Posted: Sat May 05, 2007 2:36 pm Post subject: Re: Our Money System and Oil Depletion; Are they Compatible?
Mircea wrote:
MonteQuest wrote:
A debt-based money system most certainly is not sustainable.
Sure it is.
Nonsense. A debt-based money system is based upon infinite growth in a finite world.
Quote:
MonteQuest wrote:
And why do we allow externalized costs?
No one "allows" them. They exist, regardless of the type of economic system or monetary system. Even if you had a barter system, you would still have externalized costs.
They exist only because they are not counted, and we allow that. Do you posit that an economic system cannot exist that counts the true costs? Why would there always be externalized costs?
Quote:
MonteQuest wrote:
Could capitialism even exist if we paid as we went? Don't think so.
Ah, now we see the problem.
You're confusing economic theory with economic systems.
Ok, let me rephrase that; could our level of capitalistic affluence even exist if we paid as we went? Not. _________________ A Saudi saying, "My father rode a camel. I drive a car. My son flies a jet-plane. His son will ride a camel."
Live in Arizona? Check out: http://sustainablearizona.org and read my blog.
Posted: Mon May 07, 2007 1:57 pm Post subject: Re: Our Money System and Oil Depletion; Are they Compatible?
I need some economic primer or somefink...
this external cost thing is a function of reality called time
ie the space in time between a action and its effect is a deferred cost..
a animal(species) will have deferred lagged effects on the environment ..external costs, which are paid by other organisms or physical processes,
effects ,cost/benfits are all really impossible without external costs in energy terms.. thats the nature of reality
Am I right or stupid?
the boundary conditions which set up definitions of "sustainability" are time span dependent.. I suppose solar flux is assumed as forever in practical terms (for now)
and debt=leeching from external sources..which deplete in the finite
reality we find ourselves in
therefoe for external cost to have MQ's meaning they must represent what?
Posted: Mon May 07, 2007 2:32 pm Post subject: Re: Our Money System and Oil Depletion; Are they Compatible?
MonteQuest wrote:
Mircea wrote:
MonteQuest wrote:
A debt-based money system most certainly is not sustainable.
Sure it is.
Nonsense. A debt-based money system is based upon infinite growth in a finite world.
All financial systems are debt-based in one way or another, even the barter system, and all are predicated on the assumption of infinite growth. I said it was sustainable, not desireable. If anyone has a superior system, I'm willing to entertain suggestions.
We could go back to the gold standard, or silver standard or even the urine standard, but it would be very traumatic.
It would require obtaining a national consensus on a number of core value issues, such as the role of gender in society, age discrimination and the length of time people can work, expectations of retired workers, and the expectations of society as a whole, particularly with respect to social services.
And then society would have to be re-educated to accept the new core values.
Quote:
MonteQuest wrote:
And why do we allow externalized costs?
No one "allows" them. They exist, regardless of the type of economic system or monetary system. Even if you had a barter system, you would still have externalized costs.
They exist only because they are not counted, and we allow that. Do you posit that an economic system cannot exist that counts the true costs? Why would there always be externalized costs?[/quote]
They aren't counted because they are sometimes unknown, and often they exist as elusive variables. Admittedly, externalized costs sometimes arise because of poor planning, bad policy or inefficient operations.
If you want to factor externalized costs into the price of something, you first have to qualify the costs, then quantify them, then determine who should bear the costs and apportion the costs appropriately.
How many layers of bureaucracy would that take, how much would the bureacracy cost and who should pay for it?
MonteQuest wrote:
Ok, let me rephrase that; could our level of capitalistic affluence even exist if we paid as we went? Not.
I dare say most people would still be enjoying meatless dinners 2-3 nights a week, like they did up until about the 1970s. Having been at the local deli recently, I couldn't help but notice that Hot Souse and Chitlins aren't big sellers anymore, and I'll bet most people nowadays don't eat pork rinds while watching TV (typically at the home of one of the few neighbors on your street that had a TV -- and hopefully that neighbor was on the same telephone party line with you -- for convenience of course).
However, the Capitalists themselves would still enjoy a great deal of affluency.
Posted: Mon May 07, 2007 3:31 pm Post subject: Re: Our Money System and Oil Depletion; Are they Compatible?
Mircea wrote:
If you want to factor externalized costs into the price of something, you first have to qualify the costs, then quantify them, then determine who should bear the costs and apportion the costs appropriately.
ok.sorry for butting in..
are we being too mr nit picky...
isn't just a case of factoring the prominent external costs.. eco impact.. the cost of replacing the resource whatever rather trhan getting everything down from the get go.
the restructuring topic and this are related
post PO/Pfossil fuels economics really equates to an adjustment not a complete practopia for all future history.
surely the degree of disagreement is really how far ahead your definitions apply
nothing is sustainable in a absolute sense and some things are not sustainable in the short term..
your use of sustainable is in some ways unhelpful because its reaally another term for self correcting
animall/species behavior feeding back into the environment produces a sustainable ecosystem but the species itself may trigger events that see it go extinct.. from a pov of selection sustainability is linked to a system wider than ourselves..
this is not a helpful definition
sustainable in this context must equate to comfy/bearable living for a sustainable number of humans.
as you say the market is always correct .... if there is a famine people starve and the price of food goes up
I wouldn't call that a solution thou
I think you two are talking across each other to great extent
as for your demand on consensus(debate) gender roles etc etc..well why not?
Posted: Mon May 07, 2007 8:09 pm Post subject: Re: Our Money System and Oil Depletion; Are they Compatible?
Mircea wrote:
All financial systems are debt-based in one way or another, even the barter system, and all are predicated on the assumption of infinite growth. I said it was sustainable, not desireable. If anyone has a superior system, I'm willing to entertain suggestions.
How can something based upon infinite growth be sustainable?
"Sustainable growth" is an oxymoron.
Under our current paradigm, there is no superior or better system.
The only system that works is the one Mother Nature uses, which we need to learn to respect, accept, and implement.
Quote:
MonteQuest wrote:
They exist only because they are not counted, and we allow that. Do you posit that an economic system cannot exist that counts the true costs? Why would there always be externalized costs?
They aren't counted because they are sometimes unknown, and often they exist as elusive variables. Admittedly, externalized costs sometimes arise because of poor planning, bad policy or inefficient operations.
Bullshit! Most, if not all, externalized costs are known in time. And we have had plenty of time for them to become self-evident. Smokestack effluents, industrial discharge of toxic wastes into rivers and streams, ICE exhaust that lead to smog, pesticide residues; all known for years and all externalized to avoid the true cost of our industrial production.
In some cases we have started to address them with the implementation of NEPA, the Clean Air Act, Clean Water Act, Endangered Species Act, etc.
But not enough to correct or internalize the problems and costs. To do so would impact "economic growth."
"Business" has fought these measures tooth and nail.
Global warming.
Loss of biodiversity.
Massive pollution.
Degrading water and air quality.
Rising health costs.
The list goes on.
Quote:
If you want to factor externalized costs into the price of something, you first have to qualify the costs, then quantify them, then determine who should bear the costs and apportion the costs appropriately.
How many layers of bureaucracy would that take, how much would the bureacracy cost and who should pay for it?
We all should pay for it. But that would take a powerdown, restricted per capita consumption, restricted production, and reduction and stabilization of the population. It would entail an ecological paradigm where we accept the limits of our production dictated by nature's limits, not supply/demand.
In other words, a much lower standard of living as we know it, but most likely, a far better quality of life.
All things we are not willing to factor into the "equation." _________________ A Saudi saying, "My father rode a camel. I drive a car. My son flies a jet-plane. His son will ride a camel."
Live in Arizona? Check out: http://sustainablearizona.org and read my blog.
Posted: Tue May 08, 2007 10:18 pm Post subject: Collateral
MonteQuest wrote:
"Houston, we have a problem." The world's present industrial civilization is saddled with a dilemma: how can a debt-based monetary system based upon infinite growth in a finite world deal with resource depletion? Quote me and answer that question with your reply.
In this day of salespeople practically chasing down everybody including beggars to open new credit card accounts, it may seem like an alien concept, but you know, in the misty depths of antiquity, there were income checks for any kind of loan and collateral must be given. And the bank could foreclose on any non-performing loan.
In an age of permanent economic contraction, banks can revert to this secure way of operation. They can still give out loans with interest rates, and some people will even be able to pay back these loans--oil companies anyone?--but for the majority of loans, the banks make their profit by selling the collateral. They will require the collateral to be much higher in value than the loan they are giving out, because everything will be depreciating over time. A company might, say, borrow money to set up a new branch, but in the end the whole company may be sold for little more than what a single branch is worth.
In this way, banks can serve as the engines of economic implosion even while continuing to rake in profits.
Posted: Wed May 09, 2007 12:26 am Post subject: Re: Our Money System and Oil Depletion; Are they Compatible?
P.S. In reviewing this thread I saw that you provided convincing arguments that in a permanent recession 'there won't be money to go around' and hence the monetary system will collapse. (I'm going by the poll title 'Is a debt-based monetary system compatible with oil depletion?' here; during the discussion, WHAT exactly is supposed to collapse or not collapse becomes less clear.)
(BTW: debt-based monetary system = DBMS from now on.)
To this I say--of course there won't be enough money to go around. There won't be enough good or even food to go around, so this fits perfectly. People WILL starve and die, but does that mean the monetary system will collapse?
I think we need to define what is meant by 'collapse' AND *what* is collapsing here.
1. Are we talking about whether the 'debt-based monetary system' will collapse or not? (throughout the discussion you seem to have shifted to talking about an economic collapse. I think if you are talking about the economy, it will by definition collapse in a world where production is in permanent decline. But does that mean the 'debt-based monetary system' has collapsed?
2. If we *are* talking about the DBMS, what is meant by a collapse of it?
-Does it mean that nobody will ever lend 'money' to anybody anymore? (unlikely. Would the down-and-out compulsive gambler borrowing money from loan sharks be considered a continuation of the DBMS? If so, I suspect that in a world of permanent decline this monetary system will grow and grow )
-Does it mean that the currency will fall into disuse? (probable--but a lot of other things can cause that to happen. Japanese war banknotes didn't last long in China after they lost the war, either.)
-... and is not replaced by a new currency? (a lot of questions are involved here. Would the people that overthrow the current US government institute a new DBMS of their own? If such a system is bound to fail, does that mean that any revolutionary government that institutes a DBMS is bound to fail?
-what if any and ALL forms of centralized government is unsustainable in a permanently declining world? Does that mean the DBMS is also unsustainable? Or should DBMS be considered separately from centralized government?
-... (fill in your own definition here, that would be the best thing)
OR: Are you really trying to argue that a debt-based monetary system is not GOOD for society in a declining world?
Joined: May 22, 2004 Posts: 1423 Location: Ottawa, Ontario
Posted: Wed May 09, 2007 1:41 am Post subject: Re: Our Money System and Oil Depletion; Are they Compatible?
Re: Joe0Bloggs,
I think the main argument is whether or not the monetary system will colapse as a medium of exchange.
MQ's position is, I believe, based on the premise that "A debt-based money system is based upon infinite growth in a finite world." I have attempted to point out (without success) that this is a true statement as long as you understand that the infinite growth it refers to is in the money supply and not the economy. In other words moderate inflation can aleviate the problem caused by a contacting economy to the money supply.
Only when inflation gets to the extreme of hyperinflation does it cease to function as a medium of exchange. With persistant moderate inflation people might not even recognize that the economy is contracting since inflation is currently deliberately under-reported. _________________ Biofuels: The "What else we got to burn?" answer to peak oil.
Posted: Wed May 09, 2007 4:12 am Post subject: Re: Our Money System and Oil Depletion; Are they Compatible?
nero wrote:
Re: Joe0Bloggs,
I think the main argument is whether or not the monetary system will colapse as a medium of exchange.
Is it? Seems to me the premise is by definition more loaded than this. What does the 'debt-based' in 'debt-based monetary system' stand for? Surely 'DBMS' is different from just 'MS'. I mean, is an MS using gold as the sole medium of exchange a DBMS? I do believe that the loan sharks lurking outside prehistoric casinos predate the advent of fiat currency!
MQ also repeatedly said that in a DBMS ALL money is money owed to somebody--I find this an incredible claim and can't see how this could be so. Is he speaking specifically of the US economy, where thanks to the trade deficit everybody owes thousands of dollars to the rest of the world? What if we are talking about China, which is swimming in so much money that the government doesn't owe anybody any money and in fact is lending out more and more money every day? Even if TSHTF and China finds itself trying to foreclose on nothing but worthless MacHouses, the Chinese still aren't going to owe anybody any money.
(OK I just read up about DBMS on wikipedia. It seems that loaning money is part of the definition of DBMS: 'as a condition of its creation it is required to be paid back at some point in the future'. I have thought about this. My response can be summarized as follows: a purely DB MS doesn't make any sense. At some point, the bank had to pay its employees, and heck, the banker had to buy food! These have to be paid for with 'real' money. Can the banker buy a burger with $10 and expect McDonald's to pay him $11 tomorrow!??
I don't think there is, or has ever been, a money system where ALL the money is money owed to the bank.)
Joined: Mar 07, 2007 Posts: 358 Location: Holland, United Kingdom (of the seven Netherlands)
Posted: Wed May 09, 2007 9:15 am Post subject: Re: Our Money System and Oil Depletion; Are they Compatible?
Joe0Bloggs wrote:
Can the banker buy a burger with $10 and expect McDonald's to pay him $11 tomorrow!??
I don't think there is, or has ever been, a money system where ALL the money is money owed to the bank.)
All money is money owed to someone. Not TO the bank, but to the owner of the money BY the one printing the money.
The banker buys a burger with $ 10. That $ 10 is a piece of paper that says: I owe you $ 10. The IOU even has the central banker's signature on it. And it tells you to trust in God that he actually will give you something valuable back for his IOU. I hope you never accepted any of this guy's IOUs, because he owes a lot of money to a lot of people.
Joined: May 22, 2004 Posts: 1423 Location: Ottawa, Ontario
Posted: Wed May 09, 2007 9:20 am Post subject: Re: Our Money System and Oil Depletion; Are they Compatible?
Joe0Bloggs wrote:
I don't think there is, or has ever been, a money system where ALL the money is money owed to the bank.)
There is money that is created by commercial banks when they grant credit to an indivdual. This expands the money supply because the bank doesn't tell the depositor that their money isn't really in the bank anymore.
Then there is the money created by the central bank (the FED) when they expand the monetary base. (This is where the actual paper currency comes from) The central bank inserts this money into circulation by lending it to the government. The government treats this debt like any other debt. They pay interest on it and promise to pay back the principle.
So yes basically all money is created by lending it to someone who promises to pay it back. The central bank runs itself on the interest it receives on the debt it holds and (mostly) returns the profits back to the government.
The central bank instead of buying debt could have bought a hard asset like gold to put the money into circulation. This is the way it used to work.
If you think about the way the central bank inserts money into the economy you realize that in effect they are simply giving free money to the federal government to spend. Some people advocate (I think MQ does) that the whole rigamarole of buying federal debt and then returning the interest be suspended and the central bank should just give the money directly to the federal government. If you trusted politicians to not abuse this non tax revenue stream this would be fine as well. _________________ Biofuels: The "What else we got to burn?" answer to peak oil.
Posted: Wed May 09, 2007 3:08 pm Post subject: Re: Our Money System and Oil Depletion; Are they Compatible?
nero wrote:
I have attempted to point out (without success) that this is a true statement as long as you understand that the infinite growth it refers to is in the money supply and not the economy. In other words moderate inflation can aleviate the problem caused by a contacting economy to the money supply.
Only when inflation gets to the extreme of hyperinflation does it cease to function as a medium of exchange. With persistant moderate inflation people might not even recognize that the economy is contracting since inflation is currently deliberately under-reported.
Not my forte but I would have thought it is difficult to expand the money supply with low inflation without actually making stuff (using energy )?
Infinite(big/continuious) growth in the money supply without actually making things must equal hyper-inflation surely?
Joined: May 22, 2004 Posts: 1423 Location: Ottawa, Ontario
Posted: Wed May 09, 2007 6:18 pm Post subject: Re: Our Money System and Oil Depletion; Are they Compatible?
mididoctors wrote:
Not my forte but I would have thought it is difficult to expand the money supply with low inflation without actually making stuff (using energy )?
It is never hard to increase (or decrease) the money supply. The trick is to have the fine control so that you manage to meet you target inflation rate.
I don't understand why you link inflation with economic growth. Inflation means more money chasing fewer goods. Nowadays inflation is only a worry when the economy is growing strongly because the bottlenecks to increased production are reached only when the economy is increasing strongly. In a declining resource economy, the bottlenecks will be tightening, choking back growth and also causing inflation (eg. the current inflation in the oil services sector).
Quote:
Infinite(big/continuious) growth in the money supply without actually making things must equal hyper-inflation surely?
Well if the economy was declining by 3% a year, and you increased the money supply by 3% a year that would imply an average inflation rate of 6%. That isn't exactly hyper inflation. The real problem is that nothing ever happens at the average rate. The average masks large swings that I expect will only get larger. It will take a very skilled captain to navigate the money supply throught the hurricane of economic disruptions caused by the "above ground factors" associated with peak oil. _________________ Biofuels: The "What else we got to burn?" answer to peak oil.
Posted: Wed May 09, 2007 7:17 pm Post subject: Re: Our Money System and Oil Depletion; Are they Compatible?
Gerben wrote:
Joe0Bloggs wrote:
Can the banker buy a burger with $10 and expect McDonald's to pay him $11 tomorrow!??
I don't think there is, or has ever been, a money system where ALL the money is money owed to the bank.)
All money is money owed to someone. Not TO the bank, but to the owner of the money BY the one printing the money.
The banker buys a burger with $ 10. That $ 10 is a piece of paper that says: I owe you $ 10. The IOU even has the central banker's signature on it. And it tells you to trust in God that he actually will give you something valuable back for his IOU. I hope you never accepted any of this guy's IOUs, because he owes a lot of money to a lot of people.
But there is no interest generated from this kind of IOU. I wish there were (holding a banknote and reading the '...promises to pay the bearer on demand xxx dollars' line as we speak), but no matter how long I hold on to my $100 bill, it is not going to turn into $110 when I hand it in to the bank.
Thus this kind of 'debt' is irrelevant to the Debt Virus hypothesis.
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