Video: Magic Banker attempts to fill a tall glass with a shot glass!....LOL

[BullionBoy]

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[TD]This really makes it simple for people.......

http://www.youtube.com/watch?feature=pla...B5GGQ1NvYI

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[cornell]

I kind of want to question some of the logic used in this video, more specifically that because the money supply is less than the amount of debt outstanding, that the debt cannot be paid off. It sounds elegantly simple, but I'm not sure I'm buying it.

Let's look at a very simplified example: Suppose A owes B $100 and B owes C $100. Let's say these are the only people in the economy and the money supply is equal to $100. If A pays B $100, B can take that $100 and pay C and all debt is canceled. In this case money supply is less than debt, but it can still all be paid off because debtors are collectively in debt to each other.

Can someone let me know where I'm going wrong here?

 

[BullionBoy]

I kind of want to question some of the logic used in this video, more specifically that because the money supply is less than the amount of debt outstanding, that the debt cannot be paid off. It sounds elegantly simple, but I'm not sure I'm buying it.

Let's look at a very simplified example: Suppose A owes B $100 and B owes C $100. Let's say these are the only people in the economy and the money supply is equal to $100. If A pays B $100, B can take that $100 and pay C and all debt is canceled. In this case money supply is less than debt, but it can still all be paid off because debtors are collectively in debt to each other.

Can someone let me know where I'm going wrong here?

First, you did not take compound interest into account. Where is that money to come from?

Secondly, The "C' in your example is the Fed - the originator of all money. When C is 'paid off' there is literally no money left in circulation....so, NEW money has to be injected into the system with interest.....and the circle jerk of universal, perpetual debt never ends.

In an honest economy, money would be injected into the system interest free...and the only form of money lending permitted would be for commercial expansion.

Loans for 'consumer spending' is usury and inflationary.