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BilPrestonEsq
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Is there more debt then money?
Yes, first debt THEN money - otherwise you wouldn't need to borrow the money in the first place. . . ok, sorry to be rude but can't you visually spell check a 6-word post?BilPrestonEsq said:Is there more debt then money?
Or you could say that lending money generates inflation by (virtually) increasing the money-supply and this results in a lower ratio of money to prices, which causes the money that's in circulation to not be enough to go around. If I lend you 1 million to buy a house and then sell you a house for 1 million, I have made a million and you owe me a million. There's not enough money for you to pay off your debt unless you get it from me, but I have no reason to pay it to you unless you borrow it. Therefore, you could say, "there's not enough money to go around" without you borrowing more money.talk2glenn said:Brainstorm is correct - there is not enough money to go around. This is why money has value, and why there is a debt market.
talk2glenn said:Brainstorm is correct - there is not enough money to go around. This is why money has value, and why there is a debt market.
That's not what talk2glenn said. "not enough to get around" is about scarcity:BilPrestonEsq said:So money has value because of debt? Could you elaborate on that a little?
http://en.wikipedia.org/wiki/ScarcityGoods (and services) that are scarce are called economic goods (or simply goods if their scarcity is presumed). Other goods are called free goods if they are desired but in such abundance that they are not scarce, such as air and seawater.
BilPrestonEsq said:Also our debt seems to be rising and debt is money right? I believe you(talk2glenn) said that debt can be liquidated when the economy needs to be 'stimulated'. So why not just turn all that debt into money? Then we can spend all the money and everything will be ok, right?
BilPrestonEsq said:What is going to stop the debt from rising? What is going to stop inflation? 2 questions plain english in your words. READY...GO!
WhoWee said:Cuts in spending will free cash to pay debt down. Inflation has been suppressed for the past few years - however, the increase in fuel prices (and increased demand for fuel globally) may trigger an increase beyond anyone's control?
BilPrestonEsq said:If there is more debt than money how do you pay it back? If you pay it back then there would be no money right? And still more debt? Who owns this debt?
So why not just turn all that debt into money?
What is going to stop the debt from rising? What is going to stop inflation?
If I lend you $10 and you lend it to someone else, there's $20 of debt for $10 of cash. As for paying it back...when people say the economy is a house of cards, this is what they are talking about. If you don't pay me back then TWO people default on their debt. That's a big part of what caused the current economic situation.BilPrestonEsq said:If there is more debt than money how do you pay it back? If you pay it back then there would be no money right? And still more debt? Who owns this debt?
BilPrestonEsq said:Fuel is completely separate from this equation. Inflation is not suppresed as it has continued to grow since the Fed came into existence. Aren't you spending when you pay down debt?
WhoWee said:What can he do?
If you pay the required interest PLUS principle of a debt, the debt is repaid. The lender now has the money that you used to pay off the debt, provided that lender hasn't already spent it or lent it out to other borrowers. If you want to get that money without borrowing it or taking it by force, you would have to do something to solicit payment for some good or service. Since a lot of people don't like to be bothered by salespeople other than their usual providers, it can be very difficult to solicit revenues/income and many people resort to taking on more debt to continue funding their search for money. It is a problem, imo, when the economy has adjusted to this fact by expecting a certain amount of revenue to come from the spending of people searching for income. How is it fair to profit from people's search for money?BilPrestonEsq said:If there is more debt than money how do you pay it back? If you pay it back then there would be no money right? And still more debt? Who owns this debt?
I consistently post about debt being not only bad but absurd. Did you read my post about people borrowing money and then lending it out at a higher interest rate, and so forth? It is disturbing to me that people think economic productivity can be generated by financial intermediacy. What would happen if everyone wanted to make money by borrowing at one price and lending at a higher price? How many such people can the productive sectors sustain? It would be far better, imo, to have an economy that is good at distributing labor than one that distributes money in the form of debt, bureaucratic jobs, etc. That way, no one would be able to claim that anyone else doesn't "pull their weight" when times get tough. To give just an oversimplified example, if everyone performed some agricultural labor, no one could ever say that anyone didn't earn the food on their table. With an economy driven by debt, stimulus, bailouts, and other forms of money-distribution/management services, too many people are left vulnerable as just one more employee whose layoff reduces costs. No one should be made redundant with superfluous jobs. No one should be denied learning the basic skills that make them proficient in generating their own food, shelter, and basic health-care from the ground-up if need be.BilPrestonEsq said:Nowhere in this thread has anyone made a case that debt is a bad thing.
There needs to be some critical re-thinking of financialism. Hard work and innovation used to be the key to wealth. Now all people can think about is how to cash in on someone else's hard work and innovation. Too much management weighs down the cart and drains the horses dry. There needs to be a shift from investment-driven consumerism to increasing direct labor-contributions to your own wealth. What ever happened to "sweat-equity?"WhoWee said:The key to wealth is leverage - used incorrectly - it's also the expressway to ruin.
brainstorm said:There needs to be some critical re-thinking of financialism. Hard work and innovation used to be the key to wealth. Now all people can think about is how to cash in on someone else's hard work and innovation. Too much management weighs down the cart and drains the horses dry. There needs to be a shift from investment-driven consumerism to increasing direct labor-contributions to your own wealth. What ever happened to "sweat-equity?"
That's what I would call financialist thinking. Why wouldn't you expect someone with the means to develop a good idea to invest in it themselves instead of using it as an opportunity to saddle someone else with debt?WhoWee said:The person with the idea is usually the one that needs the leverage - someone else's money.
brainstorm said:That's what I would call financialist thinking. Why wouldn't you expect someone with the means to develop a good idea to invest in it themselves instead of using it as an opportunity to saddle someone else with debt?
I was trying to make the point that your framing is spinning the lender as doing a favor to the borrower, but you could just as easily spin it the other way and say the innovator is doing the person/people with means to implement the idea the favor.WhoWee said:Actually, often times the person "saddled with the debt" is the one with the idea. The person with the means are often referred to as an "angel" - venture capital typically funds under-capitalized good ideas with a high rate of return expectation.
brainstorm said:I was trying to make the point that your framing is spinning the lender as doing a favor to the borrower, but you could just as easily spin it the other way and say the innovator is doing the person/people with means to implement the idea the favor.
In your version, the innovator takes the credit risk and everyone else, including her investors, employees, and sub-contractors get to walk away from the process with money free and clear of any outstanding debt. In my version, the innovator would just be one more party trying to sell their part of the project, the same as the employees and lenders. See, I don't think it's fair that the person with the idea has to shoulder all the risk while everyone else gets to cash in on the borrower's risk. If the borrower goes belly up, everyone else walks away with their money, including the lender provided the government is still bailing out banks at the time of the default.
This is confusing so let's put it concretely. If I design a new type of window and approach you as a window manufacturer, you could either invest in my design with your industrial resources or you could refer me to a lender and then charge me to use your facilities to develop my idea. If you do the latter, you would have no real interest in seeing my new window design succeed because either way you get your money and I get stuck with the debt. However, if you really believe my design is promising, you would jump at the chance to gain access to the technology instead of your competitors.
"Greater risk = greater reward" is a strategy to seduce someone into taking a leadership role that shifts the burden to them while promoting some secure gain for yourself. There are plenty of people with money to invest who would drool at the idea of someone approaching them with 30% over 5 years with unlimited potential - why, because that is their only means of income. What do the investors do when they have no one left but themselves to generate their 30% over 5 years?WhoWee said:I've always believed the greater the risk - the greater the reward was the standard. In your example, the idea person would be taking the path of least resistance and lowest reward.
If the idea person instead went to a group of private investors and offered them a 30% compounded return over 5 years (assuming the idea was suitable to such terms) and started a new venture. The idea person would assume risk, but would have unlimited earnings potential.
brainstorm said:"Greater risk = greater reward" is a strategy to seduce someone into taking a leadership role that shifts the burden to them while promoting some secure gain for yourself. There are plenty of people with money to invest who would drool at the idea of someone approaching them with 30% over 5 years with unlimited potential - why, because that is their only means of income. What do the investors do when they have no one left but themselves to generate their 30% over 5 years?
"Financialism" is getting an ever-clearer meaning to me from your posts. "Investor" is not a totalizing status. You may make money from financial investments, but you still spend money and perform labor to consume. You have to do some things for yourself and all those things are the beginnings of forms of labor that you could be contributing to some enterprise. Obviously it is easier if financial business remains lucrative enough to avoid any form of non-consumptive labor, but when it doesn't, "investors" can also end up looking for a way to substitute capital with labor. Investing your own labor is also a form of investment.WhoWee said:Invest in the equity markets, real estate, Treasury bonds, corporate bonds, futures, or gold? Investors invest - that's what they do.
Ok, I get it. You're married to insisting that this exploitative relationship between investors and inventors is not only natural but in the benefit of the inventors because "risk bring rewards." What would it take to make you realize that risk/reward is something you can sell to people to secure a less risky profit for yourself?WhoWee said:I'll say it again - investors invest.
http://www.entrepreneur.com/vc100
"Entrepreneurs were the big winners in 2007, receiving more than $7 billion in venture capital a quarter for four straight quarters--a phenomenon not seen since 2001. Venture capitalists invested $29.4 billion in 3,813 deals in 2007, a 10.8 percent increase in dollars and a 5 percent increase in deal volume over 2006."
The "entrepreneurs" are the idea guys.
brainstorm said:Ok, I get it. You're married to insisting that this exploitative relationship between investors and inventors is not only natural but in the benefit of the inventors because "risk bring rewards." What would it take to make you realize that risk/reward is something you can sell to people to secure a less risky profit for yourself?