[onlooker]

Oh yes rings very very true.

[MonteQuest]

Then all the income I've earned over my lifetime has been borrowed?

Borrowed by someone or it wouldn't exist. If all money in circulation is loaned into existence--which it is--then yes, the money you earned was the principle of a past bank loan, borrowed at interest.

To put it another way, if all debt was paid off, there wouldn't be any money in circulation.

Why? Because all money is debt. An IOU.

If you have money in your wallet or under your mattress, somebody has a loan out on it or it wouldn't exist.

[Newfie]

So what changes when I buy a tangible asset? Like some land.

Then I turn the debt into something real?

[onlooker]

So what changes when I buy a tangible asset? Like some land.

Then I turn the debt into something real?

How many can buy landed property without taking out a loan? Not many.

[vtsnowedin]

You make it sound like nobody has any assets that are paid for or any equity in their house or land. If that were true nobody would have a positive net worth and we are far from that.

[davep]

You make it sound like nobody has any assets that are paid for or any equity in their house or land. If that were true nobody would have a positive net worth and we are far from that.

That's beside the point. Monetarily there is always more debt than equity.

[onlooker]

You make it sound like nobody has any assets that are paid for or any equity in their house or land. If that were true nobody would have a positive net worth and we are far from that.

No I am just highlighting what Monte said that all assets purchased and monetary transactions are derived from lending in this type of economy. Your house is yours as long as you can pay the mortgage payments and do not default on it. Of course in the meantime you can enjoy it , rent it out etc which is why investing in a landed property is generally a good idea for a person. Nevertheless, it is a form of rented asset in so much as they're is a debt attached to it.

[MonteQuest]

To put it another way, if all debt was paid off, there wouldn't be any money in circulation.

A little elaboration for clarity here, as my above claim was a bit misleading. If you tried to retire all debt, there isn't enough money in circulation or anywhere else to do so.

Even if you used all of M1 (coins, paper money and checking accounts.) you couldn't retire the debt. If you then went to M2 (savings deposits, money market mutual funds and other time deposits plus M1) you couldn't retire the debt. Then if you tapped M3(M2 as well as large time deposits, institutional money market funds, short-term repurchase agreements and other larger liquid assets) you couldn't retire all the debt.

So, even with the broadest possible definition of “money”, we simply cannot come up with enough to pay off the debt. Under our current debt-based money system, there is always more debt than "money" to retire it.

[MonteQuest]

For visual clarity, American are in debt to the tune of $60 trillion dollars. M1 is about 3 trillion.

[MonteQuest]

So what changes when I buy a tangible asset? Like some land.

Then you turn a liquid asset into one not so liquid. When you go to sell it, it will be purchased with liquid assets, borrowed at interest. The value of your asset can rise or fall with the market or with inflation/deflation of the currency.

[Newfie]

Monte,
The MONETARY value rises and falls. That's an abstraction.
The value to you and your family is something different. It can vary also, but for different reasons.
And, money or investments can go away, evaporate.
Real assets are more permanent. You can be stripped ofownership, but it's usually harder.

[MonteQuest]

Monte,
The MONETARY value rises and falls. That's an abstraction.
The value to you and your family is something different. It can vary also, but for different reasons.
And, money or investments can go away, evaporate.
Real assets are more permanent. You can be stripped ofownership, but it's usually harder.

And this relates how--to debt based money?

[Newfie]

Well one can worry about money or value. Or how to change money into something of value. Money in and of itself has very little value. It is what we do with it that applies to the thread title.

[evilgenius]

Monte,
The MONETARY value rises and falls. That's an abstraction.
The value to you and your family is something different. It can vary also, but for different reasons.
And, money or investments can go away, evaporate.
Real assets are more permanent. You can be stripped ofownership, but it's usually harder.

And this relates how--to debt based money?

I think MonteQuest is right here, Newfie. The thing about land is that you have no idea if it will be that one big win among all of the other investments you should make with your money, diversification being the only hedge anybody has against randomness. Even in a deflationary environment like this one, if you believe like me that is where we are, you may not win with land. Just because you have a built in prejudice in favor of land it doesn't mean that going forward it will actually work out for you, no matter how much it soothes the peculiarities of your life, like the instinct to hunker down. You may very well be saying to yourself that at least you would have a place to live and some manner to feed yourself if you bought land. Let the land go down in monetary value, you might say, and therefore the price of my survival go up - wouldn't you still be alive? Social unrest, as in redistribution or an obtuse tax burden could unhinge you. Imagine paying taxes in an amount that, right now, seems fairly low, but tomorrow seems very high when nobody has any money. And those are only the first things in a long list of reasons why land might fail you. Cash is actually the only thing in a deflationary environment that has a prejudice to hold up, but the Central Banks of this world can erode its value if they move properly as well.

[MonteQuest]

Real assets are more permanent.

Are they? Look at the housing crisis. Homes that were purchased or $500,000 dollars won't bring $175,000.

Homes or land are "fixed" assets, not readily made liquid like dollars in your billfold. If deflation occurs(which is too little money chasing too many houses or too much land for sale) the price drops to compete for the shrinking dollars available. Conversely, inflation(too much money chasing too few goods) drives up the price. Inflation is wrongly thought of as rising prices; that's a result of inflation of the money supply through easy credit. The FED through setting interest rates and buying/selling bonds tries to keep a Goldilocks type control of the money supply. Not too hot and not too cold.

[davep]

A little elaboration for clarity here, as my above claim was a bit misleading. If you tried to retire all debt, there isn't enough money in circulation or anywhere else to do so.

(part of) The genius of the various transition plans to an equity-based monetary system are that all debts (sovereign and private) are steadily paid back (from nothing, via the treasury or central bank) to the banks as their fractional reserve requirements are increased. This decreases debt with the endpoint being no debt-based money and a healthy base of equity. It also decreases the risk of inflation/deflation if the fractional reserve requirements are ramped up at the optimal rate with the repayment of the debt.

One of the downsides is that somebody who just took out a huge loan on a house finds himself with a paid-for house, whereas somebody renting is still renting.

[MonteQuest]

The genius of the various transition plans to an equity-based monetary system are that all debts (sovereign and private) are steadily paid back (from nothing, via the treasury or central bank) to the banks as their fractional reserve requirements are increased. This decreases debt with the endpoint being no debt-based money and a healthy base of equity. It also decreases the risk of inflation/deflation if the fractional reserve requirements are ramped up at the optimal rate with the repayment of the debt.

So, the inflation potential of pumping all these funds into the banks is neutered by forcing them to increase their reserve holdings for loans? Seems those reserve requirements would have to be well over 100% for at least some time to do that. Would the banks be able to invest that money in stocks or bonds like they did with QE? What am I missing?

[Newfie]

Paraphrasing the OP (American Dream) ....
So what do we do in the face of environmental change and resource limits, what can we expect.

I take the current discussion to be sort of about.....
"How do we preserve our wealth in the face of....."

What you guys are going on about is how the game is played, what the rules are and how it works. The rules were developed in a relatively resource rich environment. They may not work well in a resource poor era. And those rules are subject to manipulation and adjustment. What are the likely changes and how do you protect self against them?

I think it's a pretty narrow discussion that seems, to me, to be bound into the current fiscal reality which values monetary wealth.

I used land as my example of something tangible to purchase that has enduring value. If it is feeding and housing my family and I don't want to sell do I really care what's assessed value is? I think not. In my case I have some land, a good sized wood lot, that I pay taxes on and do nothing with. But I'm protecting it from being clear cut and it is a hedge for my kids. It has appreciated nicely in value but that's of no consequence, it's value lies elsewhere. Others here would evaluate it differently, and that's OK.

Monies real intrinsic value, as was alluded to above, is that it is a fungible, liquid, durable, widely accepted unit of value. But also it is DENSE, compact, transportable, you can put a whole bunch in your pocket. I know of no other unit of exchange that performs nearly as well.

Say I had $100,000 I wanted to carry with me on the boat. But I don't want some unit of money be it dollars, or euros, or whatever. There is nothin I can think of that would work. Perhaps small silver coins, but they are open to confiscation and various restrictions. 22lr bricks? Damn heavy even at today's prices. So that is monies value. Yet that rest on nothing more than trust. And if the financial system collapses and the trust is broken then money is worth zilch, potentially.

I don't think there is a perfect answer and the answers are different for each person. Land, rental properties, guns and ammo, education, what have you.

I agree with diversification when possible. But it can be difficult if you have assets tied up in a 401k or such to move them. You pretty much have only traditional investment opportunities available. I did look into doing some additional real estate investment but then there are more complications.

I personally get no value, no joy, out of having a sum of money I a back account, I'm cheap, but no Scrooge. I'd rather put that money to some better use where I can take pleasure in it. But it's not easy.

[Newfie]

Real assets are more permanent.

Are they? Look at the housing crisis. Homes that were purchased or $500,000 dollars won't bring $175,000.

Homes or land are "fixed" assets, not readily made liquid like dollars in your billfold. If deflation occurs(which is too little money chasing too many houses or too much land for sale) the price drops to compete for the shrinking dollars available. Conversely, inflation(too much money chasing too few goods) drives up the price. Inflation is wrongly thought of as rising prices; that's a result of inflation of the money supply through easy credit. The FED through setting interest rates and buying/selling bonds tries to keep a Goldilocks type control of the money supply. Not too hot and not too cold.

Monte,

I don't care if it's $500,000 or $175,000 as long as I'm intending to stay there and it doing the job I need. The land will not wash away or evaporate. They can not recall all the land and reissue new land like they can with money (Reichmark > Deutchmark).

Now if you are thinking mortgage and/or needing to move for a new job then you surely have a point. My assumption was you have some cash, what do you do with it?