Why I believe the system will hit the fan

[Thomasio]

In this topic:

https://board.freedomainradio.com/topic/46284-what-is-the-mainstream-in-this-forum/

there came up the question, why I believe our current system will hit the fan within the next 2 years, so here is my answer.

 

Before I get into it, let me state a few facts.

I hope we can agree on these without further explanation, if not let me know and we can discuss it further.

 

First of all, the following is NOT my opinion, it is NOT what I want to see, I do NOT support it, it's just a collection of facts and conclusions I draw out of it, all independent of what I believe should be done about it.

 

Fact #1: Basis of economics.

However much distorted economics might get through politics, the underlying basis is the fact that the money in circulation has to buy all the goods and services produced.

If there are more goods and services on sale than there is money, either prices have to fall or some products cannot be sold.

If there is more money in circulation than goods and services on sale, prices will increase.

In short: No matter what, the amount of money in circulation is always a precise match to the sum of all goods and services.

If productivity increases and more goods and services are produced, the money supply has to increase as well, or else you get deflation, because the same amount of money has to be able to buy more products.

 

Fact #2: The world is a CLOSED economy.

However much distorted international trade can become through imbalances, the world as a whole ALWAYS has a trade balance of ZERO.

For every surplus anywhere, there will always be a deficit somewhere else and there cannot be any deficit if nobody has a surplus.

However much advantage some country can get, there will always be some other country having an equal disadvantage (or two countries having half the disadvantage each).

Why it is just that specific country having the disadvantage can be blamed on 100s of factors, from being lazy to being corrupt or whatever, but under all circumstances and no matter the reasons, for any surplus anyone gets, someone will have the deficit.

 

Fact #3: Fiat money cannot exist without debtors.

Currencies that are based on nothing at all, where the state just prints whatever it needs, are plain worthless, they get runaway inflation and disappear in no time, so let's ignore these for the moment.

Aside of that absolutely all money in our current system is loaned into existence, there is not one single Dollar or Euro or whatever other unit of currency in the world that doesn't consist of a creditor and a debtor.

Whether it's the state taking loans from the central bank or businesses taking loans to invest or private consumers taking loans to buy houses and cars makes no difference, fact is, all money in circulation exists exclusively, because someone somewhere took a loan.

If a debt is paid back, the money loaned into existence upon creating that debt vanishes.

If all debtors would pay off all debt, there wouldn't be any money.

 

Fact #4: Interest rates are exponential functions.

No matter how low the interest rate is on a loan, unless it is a flat zero, the creditor doubles his money within a given time.

Upon 5% interest money doubles roughly every 15 years, upon higher interest rates it doubles faster, upon lower interest rates it doubles slower, but under all circumstances the money in the hand of the creditors will keep on doubling.

We all know the wheat and chessboard problem

https://en.wikipedia.org/wiki/Wheat_and_chessboard_problem

which clearly shows, in a finite world you cannot have anything exponentially growing, no matter how many debtors you can find, no matter how many loans you can give, sooner or later the exponential growth of credit will exceed the capability of loaning that amount of money into existence.

 

Fact #5: If you create a logical impossibility and try to enforce it, something unexpected will happen.

No matter what it is, if it is logically impossible it cannot be done, so if for example if you allow some country to have a permanent trade surplus somewhere in the world (i.e. Germany) you must allow some other country to have a growing deficit.

You may shift the deficit from one country to another, but you cannot avoid that the total deficit of the rest of the world towards Germany will keep growing indefinitely.

If any country manages to get out of the deficit, some other country must get into an even deeper deficit and there's no way around it.

If you try to reduce the total deficit of the world towards Germany without reducing the German surplus, that's a logical impossibility, it cannot be done and any attempt to force it will cause something unexpected to happen.

 

Fact #6: Savings are OUT of circulation.

If you make some money and you decide not to spend it, this money is out of circulation, it cannot be used to buy goods and services anymore.

Whether you store it at home or in a savings account in the bank makes no difference, it simply isn't in circulation.

Since all money in circulation must always buy all the goods and services produced, all savings taken out of circulation automatically lead to lower prices or products that cannot be sold, unless someone takes your savings in form of a loan and spends the money for something, meaning he puts it back into circulation.

 

 

If anything up to here isn't clear to you, you need a crash course in basic economics.

If you have questions up to here, feel free to ask, all the above are simple verifiable facts.

 

 

Now let's see why I believe our current system cannot keep going for long anymore.

 

Private households in the western world are overall net savers, meaning some take loans to buy cars or houses, others save for their children or their pension and the total balance over all is more savings than loans.

For example in Germany private households are saving roughly 10% of their income, they have done that during the greatest boom in the 60s, during the crisis in the end of the 70s, also during the crash of 2008/2009 and they still do it today.

In absolute numbers, in 2015 German private households have saved roughly 250 billion EUR on top of all the savings they had before and in 2016 they will save over 250 billion on top of that.

Just to make that clear, this is NOT a total of 250 billion savings, the savings INCREASE by this amount and result in an exponential curve of savings.

Not sure about the numbers in other countries, but even if the numbers are lower or higher in other countries, I believe private households are net savers in ALL countries in the world and the amount of savings isn't important, the fact they do save already gives an exponentially increasing curve of required money supply, only faster or slower, depending on the amount of savings, or else the decreasing money supply would lead to falling prices (deflation) or products that cannot be sold (depression).

 

This exponential saving doesn't even consider interest, even if interest rates would be zero (in fact they aren't far from zero these days) it wouldn't stop the exponential growing amount of savings.

Any interest paid on savings makes the problem even worse, because it adds more savings on top of the already exponentially growing savings.

 

Since ALL money is exclusively created through loans, an exponential increasing amount of savings necessary requires an exponential increasing amount of loans, just to keep the same amount of money in circulation.

If for whatever reason the amount of loans given anywhere in the world cannot keep up with the growing savings, the money in circulation will become less which directly leads to falling prices or products that cannot be sold.

No matter how many countries can manage through an export surplus to reduce the debt within their own country, that only shifts the required debt into foreign countries, but on a global scale it doesn't reduce the total amount of required debt at all.

 

All of the above still doesn't include growing productivity.

The world manages to increase productivity (the amount of value an hour of labor produces on average) at an almost steady rate of about 3% per year.

This means, even independent of savings, the money supply and thereby the amount of loans that loan money into existence must increase by 3% per year, or else you get deflation.

 

Now look into the world, look real closely, check statistics about inflation, money supply, wealth, debt, inequality and all that.

It becomes absolutely obvious, there aren't enough debtors available in the world to keep up with savings and productivity.

While savings are increasing continually, the money in circulation is shrinking, simply because the amount of money loaned into existence is less than the amount taken out of circulation through savings, while at same time growing productivity permanently increases the amount of goods and services on sale.

Then consider the total amount of debt already existing in the world, consider the required increase and remember we have been in this exponential function for many decades if not centuries.

You will discover that the world as a whole is already PAST the point where money loaned into existence could keep up with savings taken out of circulation.

The only thing that currently keeps the system going is extremely low interest rates and the fact almost all countries in the world have taken on massive national debt.

Still there is no inflation to speak of, whether in Europe, in Japan or in the US, inflation rates are at least near zero and in many countries already below zero.

Large parts of the world are already in eternal deflation and depression and the areas that aren't in depression yet aren't far away anymore, they will get there soon, even China is now slowing down and we can already predict when they will fall below zero inflation.

 

Did I make clear, the fiat money system cannot be sustained unless it finds ever greater numbers of debtors?

Did I make clear the amount of available debtors isn't sufficient to sustain the system?

 

Then consider the fact, throughout the whole world almost nobody wants to even talk about this problem.

Throughout the world all people, all regions, all countries exclusively focus on creating imbalances through which a specific individual or a specific region or a specific country could still have a thriving economy, ignoring the fact that any such imbalance will always unavoidably create unimaginable poverty somewhere else in the world.

At same time almost all politicians, almost all mainstream economists, up to the IMF try to enforce austerity on all debtors, commanding them to reduce their deficit, ignoring the fact that this will only shift the problem to some other place but cannot solve anything.

 

Then we finally get to the "unexpected consequences".

Enforcing austerity on debtors while at same time allowing exponential growth of savings is a logical impossibility, it cannot be done and the attempt to do it anyway will cause unexpected things to happen.

What that will be in detail, I cannot know, that's the literal meaning of "unexpected", but I do know that some plain basic math of bookkeeping sets the date of when this fiat money system will collapse within the next 2 years.

 

Look at the curve in this video from 2013

then look up the numbers from 2015

http://www.theguardian.com/business/2016/jan/18/richest-62-billionaires-wealthy-half-world-population-combined

and you discover, from 300 people having as much as the bottom 3 billion people in 2013, within only 2 years this has grown into 62 people having more than the bottom 3.5 billion people.

This alone should show you, that the exponential curve is extremely close to becoming a vertical line.

 

Last but not least, my conclusion:

Since almost nobody is addressing the problem, almost nobody is doing something about it, the unavoidable crash will come unexpected and will be entirely chaotic.

What the ultimate tiny little detail will be that will start the collapse, I cannot know, it may be the referendum in GB about their membership in the EU this year, or the elections in France next year, in case the right wing extremist Front National takes over, or even some near meaningless detail like another exposed scandal of fraud in the banking system.

But if our society isn't prepared for this, if it comes over us over night, if nobody knows what to do, let alone how to stop it, the actual consequences of the collapse might very well exceed your wildest nightmares.

 

The proposed gradual transition from our today's corrupt system to a free society over several generations will not work, simply because there isn't enough time left in the current system.

[utopian]

I was going to post something very much like this post lol, I hope you don't feel like I am copying you, but the fact is you have hit a lot of points that are true. Good stuff. I have some sources I will have to share in my post.

[Torero]

Thomasio, respect for taking the time and effort to make such an elaborated OP of your ideas and expectations.

 

 

 

If there are more goods and services on sale than there is money, either prices have to fall or some products cannot be sold.

If there is more money in circulation than goods and services on sale, prices will increase.

In short: No matter what, the amount of money in circulation is always a precise match to the sum of all goods and services.

 

The first "fact" however I do not agree with. It is based on the theoretical idea that (consumer) prices are purely defined on the basis of "supply and demand".

 

The one price our whole worldwide economy is based on does not behave like this. That is the oil price. Oil (crude, non-refined petroleum liquids) has a price of 30 dollars for a barrel (159 liters) now. Two years ago that price was at 100 (it even reached higher, but let's take 100) dollars a barrel. Excluding the value of the dollar itself (compared to other currencies), because that would complicate things even more, in your theoretical explanation that would mean that either the demand for oil is just 30 % of what it was 2 years ago or that the supply of oil is 3.3 times bigger, or a combination thereof.

 

I don't know much about economy but I do know quite a bit about oil.

 

Both extremes (and the combination) are ridiculous; it's NOT the case that the world is just using 30% of what it did in 2014 nor is there suddenly 3.3 times more oil. New exploration does not find huge fields and daily consumption of oil is increasing over time (with more production, more people, more growth per capita, etc.).

 

If the basis of the whole economy, oil, is not behaving according to the first "fact" you state in your OP, it becomes quite hard to go into the next points. I've read your whole introduction and based on purely theoretical principles you may be right, but the world does not work like that (evidently).

 

There's far much more power play and politics involved than to have "the system" crash in the next 2 years. Many people have done these kind of alarmist predictions (Martin Armstrong is one of them) and they didn't come out as such.

 

If it would be all a crystal clear and logical system that you can calculate in a single OP, the world would look very differently. Unfortunately the Elites (political and financial) have all the tools in their hands to play this game for much longer.

 

But even if we ignore all the objections and would take your whole OP as "the truth, the only truth and nothing but the truth" it still does not refute at all the call for philosophy, morality, peaceful parenting, non-violence and win-win negotiations, as you summarise in the words "a gradual transition from the current corrupt system to a free society".

[Matthew Ed Moran]

So we've had ongoing wars since the '60s, recurring stagflation, booms and busts, more children born out of wedlock than before in the past century, a diminishing workforce, increasing taxes, increasing social dysfunction, increasing racism against whites, increasing sexism against males and boys, public school indoctrination camps with forced "medication"...

 

I could list on and on, but my question is...

 

In what was has the shit not hit the fan already? When I hear people say that I feel like they're waiting for some day when society will collapse, as if they define collapse as something other than what has been occuring right in front of us for the past 40 years...

 

I'm not sure if that's exclusive to your post, and I know the economy might get even worse, but part of me feels like the collapse already happened and most people are just ignoring and pretending it didn't.

[Thomasio]

@Matthew M., that's quite true, I would fully agree to most of your post, but if you had red the other topic, where the reason for this topic came from, you would have seen, this was ment to argue, why we don't have the time to wait several generations for a gradual transition from our current system to a free society as proposed by those who critizised my demand for instant drastic action in several other topics we had in the last few weeks.

 

If I got the sense of your post right, the need to do something about all the points you mentioned here in fact support my demand for quick action rather than wait a few more generations?

[Worlok]

I think that your first "fact" is a bit off when you suggest that money is in some way "equal" to the sum of available goods and services. If I dig up guild or print money, goods and services don't materialize magically. It seems to be a confused explanation of supply and demand if not a confused understanding.

 

Your theory seems to ignore inflation, I.e., printing money. If money is printed too fast, not only does your savings lose value, but debt and interest you owe loses value. You will have more value by having items + their debt/interest than if you saved money. The debt/ interest and savings lose value, but the items you bought don't lose their value unless they stop functioning or aren't of use to you anymore. Inflation negates debt.

 

Supply and demand maintains goods and services and trade. Competition and technological improvement/advancement make goods commonly available.

 

Really, there are two problems. Inflation in the U.S. is used to create debt by paying the poor "lazy" huge sums of money, thus lowering production. We need production to pay the debt. Second, we need the money printed to be spread out for people to actually spend, which means we need higher wages. However, we can't use the first problem to solve the second problem... Which is exactly what big government and the left are doing and want more of. The rich, middle class, and the poor need to make more money to justify the inflation, but they have to earn it. Destroy the welfare state and excessive spending (they are one and the same) is what I suggest.

[shirgall]

What I expect is a replay of the dissolution of the Soviet Union, where our Allies, our puppets, and eventually our states get tired of our crap and move for more independence or outright succession.

[Thomasio]

Yes shirgall, that's what will happen if we just keep going like we did the last 50 years or so.

I actually believe, it will go one step further, not like the almost quiet dissolution of the Soviet Union, but more like the October Revolution in 1917.

 

If nobody does anything to address the problem of exponentially growing savings, find a working solution and go for it, I believe the most likely cause of the final stage of the collapse will be in the European Union, where one state after the other will pull out of the Union, until the remaining states cannot keep the Euro as currency at float.

The collapse of the Euro will cause the bankruptcy of several Euopean states, which will cause the bankruptcy of loads of big banks worldwide, which will ultimately cause all other fiat currencies to collapse, which will lead to the complete collapse of the entire global economy.

 

Once that happens, all trade will come to a grinding halt, causing wide spread lack of food and energy, which will cause civil unrest, which (since bankrupt governments will have no more power to do anything about it) will overthrow all political systems near worldwide, just like in Russia 1917.

 

The big problem I see in that is not only the months directly after the collapse, where plain hunger will cause chaotic situations even in the western world, I believe such an uncontrolled collapse might lead to similar results as they got in Russia, where a struggle between different ideas ended up in communism and THAT I don't want to happen.

That's why I would highly prefer a controlled collapse, some kind of organized abolishion of the states, with a preset goal to get to a free society and a realistic plan of how it can be achieved.

 

But then, as mentioned above, as long as almost nobody is willing to even talk about the problem, if almost everybody waits to see what will happen by itself, we will unavoidably hit the fan one day.

[Thomasio]

Inflation negates debt.

 

As much as I agree to the rest of your post, there you have a flaw in your point.

As I pointed out above "there is no inflation to speak of", all states in the western world struggle with their national debt, because there isn't enough inflation to negate the national debt.

Throughout the European Union, almost all countries now experience deflation, only Germany has a slight inflation of 0.2% or so, but FAR away from an inflation rate that would solve the debt problem.

The US have a slightly higher inflation rate, still WAY below of what would be needed to solve the debt problem.

 

That's because all the money given out into circulation still cannot keep up with the money taken out of circulation through savings.

And even if it could keep up, that wouldn't solve anything, because within another 2 years or so the exponential curve of increasing savings would again exceed any possible free money giveaways.

And even if you could print that much money, since all money exclusively is loaned into existence, how could you find debtors for all that printed money?

[Worlok]

As much as I agree to the rest of your post, there you have a flaw in your point.

As I pointed out above "there is no inflation to speak of", all states in the western world struggle with their national debt, because there isn't enough inflation to negate the national debt.

Throughout the European Union, almost all countries now experience deflation, only Germany has a slight inflation of 0.2% or so, but FAR away from an inflation rate that would solve the debt problem.

The US have a slightly higher inflation rate, still WAY below of what would be needed to solve the debt problem.

 

That's because all the money given out into circulation still cannot keep up with the money taken out of circulation through savings.

And even if it could keep up, that wouldn't solve anything, because within another 2 years or so the exponential curve of increasing savings would again exceed any possible free money giveaways.

And even if you could print that much money, since all money exclusively is loaned into existence, how could you find debtors for all that printed money?

 

 

 

As much as I agree to the rest of your post, there you have a flaw in your point.

As I pointed out above "there is no inflation to speak of", all states in the western world struggle with their national debt, because there isn't enough inflation to negate the national debt.

Throughout the European Union, almost all countries now experience deflation, only Germany has a slight inflation of 0.2% or so, but FAR away from an inflation rate that would solve the debt problem.

The US have a slightly higher inflation rate, still WAY below of what would be needed to solve the debt problem.

 

That's because all the money given out into circulation still cannot keep up with the money taken out of circulation through savings.

And even if it could keep up, that wouldn't solve anything, because within another 2 years or so the exponential curve of increasing savings would again exceed any possible free money giveaways.

And even if you could print that much money, since all money exclusively is loaned into existence, how could you find debtors for all that printed money?

 

My post wasn't based on free trade itself, but central banking that we have now.

 

We can and do print that much money. In the last two decades, the value of the dollar has halved. All money, of course, is loaned into existence. We use the same debtors as we always have. The U.S. population. Now, as I've said previously, I'm not suggesting that we steal more, just spend what we steal on other things. Again, the problem isn't that we have debt, the problem is that we create more debt by paying more and more people more and more money not to work. 

 

With de-regulation, tax reform (lowering excessive tax rates to increase tax receipts and loaning/investment) and federal spending cuts, you get increased need for central bank loans, which spreads out the money printed. Essentially, more trade and production increases actual worth, while the inflation (printing money) lowers the value of your debt and interest.

 

The inflation not only devalues debt and interest, but it also devalues savings. 

 

Politically and economically, we can either have a revolution of some sort, meaning that the shit hits the fan and that you understand that shit hitting a fan in your living room actually sends human feces spewing all over you, your family, your couch, your carpet and drapes. I mean the shit really hits the fan and there are actual severe consequences. Second, we can use politics and economics  to fix the problem and change the system by using the system.  I'm vying for people wising up and hopefully the second option occurring. 

[Thomasio]

 I'm vying for people wising up and hopefully the second option occurring. 

 

What you're overlooking is still the required amount of debt and the question of who shall take on that debt.

 

Printing money by itself doesn't cause inflation, only the act of handing out that money into the general population and thereby increasing the buying capacity of the people does.

As long as almost all money loaned into existence ends up in the gigantic bubbles they are currently inflating in the stock market and real estate, there is no inflation.

Your idea of devalued debt and devalued savings fails at the reality of no inflation happening.

http://www.usinflationcalculator.com/inflation/historical-inflation-rates/

Scroll down, the inflation rate in the US in 2015 was almost ZERO and hasn't been anywhere near a rate that would effectively devalue anything since 1981.

 

Sure, the USD as well as most other currencies in the world have devalued about 50% over the last 20 years, but at the same time national debt has more than tripled from $5.4 trillion in 1996 to over 18 trillion in 2015 or from 64% of GDB to 100% of GDP.

 

The major flaw in mainstream economics is the idea that just printing money would cause inflation.

It just isn't true, look at Japan

http://www.tradingeconomics.com/japan/government-debt-to-gdp

National debt was 230% of GDP in 2014, they have printed money like mad in the last 25 years, still there was no inflation to speak of

http://www.tradingeconomics.com/japan/inflation-cpi

Inflation in Japan has been very close to ZERO continuously since 1988.

 

Inflation can be generated only through letting the income of the general population increase faster than productivity increases, so they have more puchasing power, meaning they generate an increased demand.

Since productivity raises by roughly 3% per year, inflation will be the total increase in income of the general population in percent of their current income, minus 3.

Zero inflation simply means, the total income of the population has increased precisely 3%.

 

Fairly obvious, from a demand point of view it makes no difference, whether wages increase (as long as that doesn't destroy jobs) or jobs are created (as long as that doesn't decrease wages), or taxes are lowered, or social services are increased, in all these cases demand for goods and services increases.

From an economic point of view that's a different story and from a libertarian point of view that might again be different, but no matter from which point of view you see it, all it does is, it slightly increases demand, it does NOT say who shall take on the debt.

 

Private households will keep on saving, for pensions, for their children, etc., if you increase their income, i.e. through tax cuts, first of all they will pay off the debt they have accumulated in the last 30 years or so, then they will save some more and only as 3rd thing they will increase demand, so from there you get LESS debtors.

Businesses already don't need much loans under current tax rates, the large corporations have so much spare money, they buy their own shares back and still have money to buy one another, they will not take on new debt, at least not much, even if they would start to invest more.

If you cut business taxes, you may create some investments, some job creation, but you will not only not find any new debtors, you will have LESS debtors among businesses as well.

 

So unless you want the state to keep on tripling the national debt every 20 years or so, you will get deflation due to the simple fact, the economy cannot loan enough money into existence, to compensate for money taken out of circulation through savings, upon increasing amounts of goods and services on sale.

[algernon]

On a long enough timeline the survival rate for everyone drops to zero. I think this is fitting to include countries and currencies as well.

 

When? At this point no one knows. I've been paying attention long enough to know when someone says when, they've always been wrong, so far. Every year keep say next year and eventually you'll be right. In reality no idea when.

 

Be prepared as best as possible and keep living.

[Worlok]

What you're overlooking is still the required amount of debt and the question of who shall take on that debt.

 

Printing money by itself doesn't cause inflation, only the act of handing out that money into the general population and thereby increasing the buying capacity of the people does.

As long as almost all money loaned into existence ends up in the gigantic bubbles they are currently inflating in the stock market and real estate, there is no inflation.

Your idea of devalued debt and devalued savings fails at the reality of no inflation happening.

http://www.usinflationcalculator.com/inflation/historical-inflation-rates/

Scroll down, the inflation rate in the US in 2015 was almost ZERO and hasn't been anywhere near a rate that would effectively devalue anything since 1981.

 

Sure, the USD as well as most other currencies in the world have devalued about 50% over the last 20 years, but at the same time national debt has more than tripled from $5.4 trillion in 1996 to over 18 trillion in 2015 or from 64% of GDB to 100% of GDP.

 

The major flaw in mainstream economics is the idea that just printing money would cause inflation.

It just isn't true, look at Japan

http://www.tradingeconomics.com/japan/government-debt-to-gdp

National debt was 230% of GDP in 2014, they have printed money like mad in the last 25 years, still there was no inflation to speak of

http://www.tradingeconomics.com/japan/inflation-cpi

Inflation in Japan has been very close to ZERO continuously since 1988.

 

Inflation can be generated only through letting the income of the general population increase faster than productivity increases, so they have more puchasing power, meaning they generate an increased demand.

Since productivity raises by roughly 3% per year, inflation will be the total increase in income of the general population in percent of their current income, minus 3.

Zero inflation simply means, the total income of the population has increased precisely 3%.

 

Fairly obvious, from a demand point of view it makes no difference, whether wages increase (as long as that doesn't destroy jobs) or jobs are created (as long as that doesn't decrease wages), or taxes are lowered, or social services are increased, in all these cases demand for goods and services increases.

From an economic point of view that's a different story and from a libertarian point of view that might again be different, but no matter from which point of view you see it, all it does is, it slightly increases demand, it does NOT say who shall take on the debt.

 

Private households will keep on saving, for pensions, for their children, etc., if you increase their income, i.e. through tax cuts, first of all they will pay off the debt they have accumulated in the last 30 years or so, then they will save some more and only as 3rd thing they will increase demand, so from there you get LESS debtors.

Businesses already don't need much loans under current tax rates, the large corporations have so much spare money, they buy their own shares back and still have money to buy one another, they will not take on new debt, at least not much, even if they would start to invest more.

If you cut business taxes, you may create some investments, some job creation, but you will not only not find any new debtors, you will have LESS debtors among businesses as well.

 

So unless you want the state to keep on tripling the national debt every 20 years or so, you will get deflation due to the simple fact, the economy cannot loan enough money into existence, to compensate for money taken out of circulation through savings, upon increasing amounts of goods and services on sale.

I have to say that your post in completely wrong for 1 reason. Inflation is the increase in the supply of money. You have to print more Dillard's for there to be more dollars. Deflation is the effect of money increasing value by lots of supply.

 

Social welfare surrendering by the government is about half of all government surrendering. That's money that the government just gives away to people. Something like 1.5 trillion dollars. If the government prints $1.5T every year, it is essentially being paid directly to people. It places a $1.5T debt on the tax payers to pay the tax payers. That inflation also lowers the value of itself.

 

If you print money, the value of the debt, interest, and all savings drops. If you use that printed money to pay off debt instead of paying people their own money, the debt does not grow numerically. It is an invisible debt that lowers the value of your savings. This impacts the economy, so you don't see the debt and may not even know it is debt, but the debt will be there and you will feel it. Stop spending fake money and it will eventually devalue itself.

 

What I am saying is, if we just cut the hell out of spending and continue to slowly print money (by the billions and billions) every year, you will create constant debt to the tax payers that the market will even out, but will also pay off the debt while also devaluing and losing the effect of said debts.

[Thomasio]

I have to say that your post in completely wrong for 1 reason. Inflation is the increase in the supply of money. You have to print more Dillard's for there to be more dollars. Deflation is the effect of money increasing value by lots of supply.

 

Not really.

Just printing money doesn't get that money into circulation, right after printing the money lays around in the FED, but it doesn't "exist" in the economy.

Into existence it comes only after someone loaned it into existence.

Currently that's the state, loaning vast amounts of money into existence, pumping up the national debt and pushing it into the circulation through welfare and other things.

Therefore any inflationary consequence of printing money can happen only after someone loaned it into existence and if you want to reduce the welfare spending of the state (which is a pretty good idea) you have to name someone else who shall take on the amount of debt not taken on by the state anymore.

 

On the inflation itself ..... which part of "there is no inflation to speak of, there hasn't been in over 20 years and there will not be, look at Japan, printing money like crazy for 25 years and getting deflation and depression out of it" did you not understand?

As long as you have to triple the debt (no matter whether national debt or private debt or business debt) for every 50% devaluation of the currency, the net debt in relation to value increases exponentially and that's doomed to collapse.

[Torero]

Ok, Thomasio, the discussion about the economics aside, I would like to ask what do you want to do then? And how?

 

The big problem I see in that is not only the months directly after the collapse, where plain hunger will cause chaotic situations even in the western world, I believe such an uncontrolled collapse might lead to similar results as they got in Russia, where a struggle between different ideas ended up in communism and THAT I don't want to happen.

 

I think it's debatable that "communism was the result of a struggle between ideas", but ok.

 

You say "THAT I don't want to happen". In Dutch we have a word for such way of thinking; 'maakbaarheid', which would translate like "Machbarkeit" or "shapability". It is utopian. You want the world to become like X. It is opposite to the classical-liberal/libertarian laissez-faire; let things follow the natural order without external forces stepping in.

 

So my question is; if you do not want "Y to happen", how do you make sure Y will not happen?

 

That's why I would highly prefer a controlled collapse,

 

Who is in control and what are your criteria to give that control to those people?

And what are the criteria to take back that control and how do you want to achieve that?

 

some kind of organized abolishion of the states,

 

Who are the organizers and enforcers in your idea of this "controlled abolition"?

Who appoints them?

 

with a preset goal to get to a free society and a realistic plan of how it can be achieved.

 

I think the FDR approach is quite realistic (small-scale multi-generational thinking) and the "preset goal" is the free society itself. The basis (or plan) is philosophy; ethics, morality.

 

But then, as mentioned above, as long as almost nobody is willing to even talk about the problem, if almost everybody waits to see what will happen by itself, we will unavoidably hit the fan one day.

 

Glad you nuance your words more than before ("almost nobody").

 

But this statement above and your conclusion statement from the OP...

 

The proposed gradual transition from our today's corrupt system to a free society over several generations will not work, simply because there isn't enough time left in the current system.

 

...I read -and don't mind my formulation- as:

 

"Guys, guys, the system is going to collapse [in the next 2 years]. All nice bla-bla about philosophy, being moral, behaving ethically, raising children peacefully and advocating freedom and alternative currencies (e.g. Bitcoin), but there's no time for that! Quick, we have to come with a world-wide plan, enforce it, and then we'll be happy hippie hippos hopping in honey-rich Eden!"

[Thomasio]

Well @Torero, I'm no prophet and I don't have supernatural powers, therefore I can't give you an easy solution that would work under all circumstances.

When someone comes up with a suggestion, I can tell you whether or not I believe that may work out and in this specific case of a gradual transition from authoritarian government to a free society I can bring you arguments of why I believe it won't work, which is mostly the economic point of exponential growing savings that cannot be sustained over several more generations.

 

After all most people in here agree, the system is broken, we need something better.

If you want to maintain the current broken system for several more generations, you will at least have to fix it to a point where exponential savings do not destroy the economy anymore.

Since the current system is authoritarian and if you want to maintain it for decades to come, there's nothing wrong with applying authority, just changing the direction of the force.

Instead of giving the biggest tax breaks to the richest corporations, instead of allowing them to hide their money in tax heavens and move production to China, while small and medium local businesses pay the highest tax rates, we could shut down tax heavens and cut taxes on small business instead.

Instead of enforcing ever more laws and regulations on businesses that only the largest corporations can comply with, we could terminate laws and regulations and/or make exceptions for small businesses.

From an authoritarian point of view it might make sense to enforce a minimum wage on huge corporations that use their power to suppress wages, but for a small business, having just a handful of employees that's as destructive as can be.

 

Since the exponentially growing amount of money taken out of circulation through savings will destroy the economy, while all money is exclusively loaned into existence which requires exponentially increasing amounts of debt and debtors, as long as you want to maintain the broken system you will have to cut a part of the savings from the top as well as a part of the debt from the bottom once in a while.

You have to cancel out the tip of the iceberg every now and then and keep the amount of savings and the amount of debt below a level where the exponential growth can be sustained for a while and you have to repeat that every time the exponential curve becomes too steep again.

[Torero]

So answering to my objection of your world view (Machbarkeit), you reply with even more Machbarkeit?

 

Apart from the straw man argument "You want to maintain the current broken system" (nope; that's why we anarchists/libertarians/voluntaryists participate in this forum), I read several "you could", "you have to", "it might make sense to enforce...".

 

That's why I asked you specific, simple questions:

 

Who can or should do this change to the system?

Who are the enforcers?

What are your criteria to give that control to those people?

What are your criteria to take away that control again?

How are you going to force big corporations to pay taxes?

 

So far, what I've read is:

 

"No honey, no time to teach our children to behave morally and stop hitting them. No son, no time to stop stealing from others. No, sister, there's no time to stop raping your husband. In two years time we won't have running water, decent food and our house isn't worth a rat's ass, so no time for morality and ethics now. Stop it!"

 

"But, my love, what do you propose then?"

 

"Yeah, ehh, well, I don't know, I am just waving my hands, but what you are doing is not gonna work!"

 

Don't you find that a bit lame?

[Thomasio]

Now what @Torero?

Do you want an instant switch to a free society, or do you want to maintain the current system for the moment while a slow transition over several generations takes place by itself?

You cannot have both, either you abolish the system we have, or you maintain it.

If you want small steps to alter the current system, you still have to maintain the rest of the system and you have to make sure that at any given time on the way, the combination of the part that has been transformed and the part that has not, will not give you some unsolvable problems.

 

That's why I asked you specific, simple questions:

 

Who can or should do this change to the system?

Who are the enforcers?

What are your criteria to give that control to those people?

What are your criteria to take away that control again?

How are you going to force big corporations to pay taxes?

 

Starting from the current situation, the first step towards changing the system to a free society can only come from the currently ruling class, anything else would require a revolution.

You may be able to set up some petitions and demonstrate in the streets for a change, you can wait and discuss the topic until the majority of people is convinced, but actually doing something to change something without revolution can only be done by the current rulers.

The enforcers would obviously be the same ones that enforce todays laws.

The criteria are results of elections.

There is no need to take away the control "again", they already have that control and without revolution they won't lose it, so all we have to do is, once changes have reached a point where some parts of government aren't needed anymore, we take that part out, or better, the initial laws enforced to make a change should already include the abolishion of that force as soon as the change has been achieved.

 

You don't have to force big corporations to pay taxes, you can achieve the same goal by lowering taxes for small businesses or finding an average of taxes somewhere in the middle.

You only have to make sure competition is equal for all businesses, whether big or small.

If an American producer with a factory in the US has to pay a given amount of taxes, while an American corporation that has moved production to China and their official address to the Cayman Islands doesn't have to pay those taxes, either you charge those taxes upon import of the goods into the US in form of import duty, or you abolish those taxes for American producers.

Once that's equal, producers will discover, the cost of shipping all that stuff over 15,000 miles is higher than the saved cost of American labor and well paid manufacturing jobs will return to the US.

[Torero]

Now what @ Torero?

Do you want an instant switch to a free society, or do you want to maintain the current system for the moment while a slow transition over several generations takes place by itself?

You cannot have both, either you abolish the system we have, or you maintain it.

If you want small steps to alter the current system, you still have to maintain the rest of the system and you have to make sure that at any given time on the way, the combination of the part that has been transformed and the part that has not, will not give you some unsolvable problems.

Now what @Torero?

 

You keep talking about "the world" like you have just bought a magical lamp from Aladdin and have a ghost who can fulfill your wishes?!

 

I do not "want" something about/for "the world"!

 

The world is. I cannot change that, so it's useless to "want" something.

 

"Do you want people to listen to Justin Bieber and buy his crappy records?" is exactly the same question. Senseless. Utopian, Machbarkeit, dreaming, unrealistic.

 

I am a realist. The only things I can want are the things I have control over to get or change them:

 

- my environment (the country/place I live)

- my social environment (my friends)

- my choice of partner

- the way I want to raise my children

- the job I want to do

- the money I want to spend on X, Y and Z

- the hobbies I take on

- the life experiences I want to achieve

 

ALL the other matters are far, far beyond my reach and the whole point is: the same holds for you!? You are talking "we could change this, lower taxes here, we can abolish the state, we can maintain the system... etc. etc.".

 

Where did you find that magical wand or Aladdin lamp that you can just desire something and then "just change" it to your desires??

 

Starting from the current situation, the first step towards changing the system to a free society can only come from the currently ruling class, anything else would require a revolution.

You may be able to set up some petitions and demonstrate in the streets for a change, you can wait and discuss the topic until the majority of people is convinced, but actually doing something to change something without revolution can only be done by the current rulers.

 

Ok, finally we reach the core of your thoughts. I guess I speak for others too, because it cannot possibly be that I was the only one waiting to hear concrete answers. So thanks.

 

Exactly how do you expect the current Elites (or rulers) to change a system that they directly profit from in the first place (otherwise the system wouldn't be there, right?)?

 

The enforcers would obviously be the same ones that enforce todays laws.

 

Well, that "obviously" is not so clear to me. You say you want to "change the whole wide world system" but "obviously" rely on the same people that keep the system alive. To me, that would mean that "obviously" nothing is gonna happen... Why would they??

 

The criteria are results of elections.

 

Really? You believe in elections? In voting? And how exactly is that different from now? And what about the huge propaganda campaigns that will be in place? Or do you want to restrict the voting population or so? I fail to see what is different about this than what we have now. Wasn't it Einstein who said "Keep doing the same things again and again and expecting a different outcome is a sign of stupidity" (I paraphrase)?

 

And I don't understand; you picture the downfall of "the world economical system" in 2 years, so "we have to act fast". And then as a "solution" you present, sorry, but elections?? What if your party just gets a small percentage of the votes (like the sympathetic yet not less naive anti-EU party Alternative für Deutschland). Then the next election in 4 years and you're too late. Bummer.

 

There is no need to take away the control "again", they already have that control and without revolution they won't lose it,

 

In other words: "I, Thomasio, defend statism and do not want to end it, as it is there, so it's ok, no need to change it". It's circular reasoning taking the status quo as a false argument and it's immoral.

 

so all we have to do is,...

 

Your naivity seems infinite...

 

once changes have reached a point where some parts of government aren't needed anymore, we take that part out,

 

"we" (who is "we"?) "take that part out" (how???)?

 

or better, the initial laws enforced to make a change should already include the abolishion of that force as soon as the change has been achieved.

 

Yes, that would be awesome. Just how realistic do you think that is? Do you have any experience in politics? First-hand, knowing how those people "work"?

 

You don't have to force big corporations to pay taxes, you can achieve the same goal by lowering taxes for small businesses or finding an average of taxes somewhere in the middle.

 

The latter is thus forcing big corporations to pay more and reach a kind of "average". The former is enforced how exactly? By politicians? You were concerned about the state budgets. How are those states getting their budgets right if millions of small business pay less taxes?

 

You only have to make sure competition is equal for all businesses, whether big or small.

 

Really, Thomasio, I don't know if you've ever run a business (watch more Stefan's videos for advice) or worked even in a company, but this speech is some communist non-sense.

 

If an American producer with a factory in the US has to pay a given amount of taxes, while an American corporation that has moved production to China and their official address to the Cayman Islands doesn't have to pay those taxes, either you charge those taxes upon import of the goods into the US in form of import duty, or you abolish those taxes for American producers.

Once that's equal, producers will discover, the cost of shipping all that stuff over 15,000 miles is higher than the saved cost of American labor and well paid manufacturing jobs will return to the US.

 

Magic, just like that. Wow. "You just...".

 

Thomas, I guess you really need to stop dreaming and wake up from this utopian non-sense. You, me, any other forum participant here is just a TINY indvidual in a HUGE world who has "nothing to want" about it. We have no control, we have no say and no choice about "the big bad wide world" you seem so eager of "changing" using your Aladdin lamp.

 

You, me, every other person here, has however power, choice and control.

Over ourselves, our choices, our morality and our offspring. And that's about it.

 

Coming back to Justin Bieber:

 

We cannot make 'the world' not buying Justin Bieber records anymore.

The only thing we can do is not buying them ourselves.

 

And that's the message. Wake up, Thomas. Really, this utopian trap will make you very unhappy in the long run....

[Thomasio]

Sorry if I skip the rest, I guess it would get far too long to keep up if I answered all of it.

Just let me pick out one point that I can easily and beyond doubt prove.

 

Exactly how do you expect the current Elites (or rulers) to change a system that they directly profit from in the first place (otherwise the system wouldn't be there, right?)?

 

.......

 

Really? You believe in elections? In voting? And how exactly is that different from now?

 

There is one extreme example ..... let me show you.

 

The very first thing, above and beyond the profit they make out of it is the desire of the ruling class to stay in control.

We live in democracy, so unless you expect a completely rigged voting system that doesn't admit the actual results of elections, the ruling class will do whatever makes voters vote for the puppets they have in place in politics.

 

Now look at Germany and nuclear power.

(I'm not judging whether or not either of the sides in this was right, I'm not saying what I would want, I'm just using the example to show, how politics can be altered.)

 

For several decades, starting in the early 70s, loads of demonstrations protested against nuclear power in Germany.

https://en.wikipedia.org/wiki/Anti-nuclear_movement_in_Germany

Blockades of transports of nuclear waste, where people tied themselves to the rails of the railway and stuff like that.

Absolutely all surveys showed, more than half the population was against nuclear power in Germany.

But nothing happened.

In all election polls people would say something like: "I don't like nuclear power, I don't like our government supporting nuclear power, but I will elect them anyway, because over all they are "the lesser evil".

There simply was no need for the ruling class to do anything, they could use massive police force to suppress the anti nuclear movement and still be sure their puppets got reelected.

 

When after Chernobyl the center left government together with the Green Party gave the strengthened anti nuclear movement some credit and finally tried to make some laws to reduce nuclear power with the goal to replace it entirely with renewable energy, political propaganda had them lose the next elections, center right won the next elections and they promptly reversed the decision to get out of nuclear power.

 

In 2010 10s of 1000s of people had violent protests in Munich, still the center right government decided to extend the runtimes of several nuclear power plants in Germany beyond the advised lifetime of these plants, simply because all election polls showed, whether they do that or not, makes no difference on the outcome of the next elections, the majority of voters would reelect center right as "the lesser evil".

 

Then came Fukushima and things turned upside down within a week.

The very next poll showed, public opinion was now so strong against nuclear power, that center left and center right COMBINED wouldn't even have 50% of the votes anymore.

If the center parties had kept their support for nuclear power, the Left Party and the Green Party would have won the next elections by a landslide.

It didn't take any change in government, literally no change whatsoever, but a simple difference in election polls, that within the very same center right government switched the policy.

Within one week 7 reactors were shut down and the decision was made to shut down the rest by 2022.

 

THIS is how you change something within the current system.

You change the public opinion to a point where they will not elect the puppets of the ruling class anymore and the ruling class will INSTANTLY, literally within DAYS change their policies until their puppets get the votes again.

 

Again, I'm not saying I'm against nuclear power, this is just a perfect example of how public opinion can alter politics.