-----BEGIN PGP SIGNED MESSAGE----- Hash: SHA1 Steve Schear wrote:
Nerthus wrote:
Might be a bit of a stretch, but I think this is because money today is inherently a liability, that is a debt that someone, somewhere has promised to pay back.
You've got this all backwards. The bearer certificates (paper money) issued by governments is an interest-free loan by those holding the paper to the issuer.
This is true, but it is only part of the picture. The paper currency issuer (the central bank) is enjoying seigniorage, that is -- in the case of the US - -- the Federal Reserve is collecting revenue from the interest earned on the outstanding paper dollars. This earned interest is given to the Treasury and accounted for as revenue for the federal government. However, this tells us nothing about the currency's real worth. We need to look deeper to find the source of the paper currency's value. When the US government wants to create money, it issues debt instruments such as T-Bills to the Fed or to a commercial bank. The bank then credits the government's deposit (checking) account for the face value of the T-Bill. The bank believes it will collect this money back plus interest in a certain amount of time. The government can then ask the Fed to issue some paper cash in exchange for the deposit currency (new paper is then created). The T-Bill is nothing but a promise by the federal government to pay back a debt. The government has taken a loan from a bank and promises to pay it back in 1,5,10 or 30 years with interest. The money to pay it back comes directly from the tax revenues the government collects from its citizens. Thus paper currency is based on the debt saddled upon future generations of citizens/taxpayers. Interestingly, this is not much different than John Q. Public getting cash advances on his credits cards for a few years and then wondering why he is $25k in the hole and growing at 18% per annum. Many people, especially politicians, always go for the short term gain, regardless of the long term consequences. Debt-based currency (primarily a 20th century phenomenon) has ushered in a new era of political and financial irresponsibility. Eventually the debts must either be reneged on or paid off. When that time finally comes, neither option will paint a pretty picture. Nerthus -----BEGIN PGP SIGNATURE----- Version: PGP for Personal Privacy 5.0 Charset: noconv iQA/AwUBNIxg7Ra1d3zm4nqOEQJnnwCfaOLKaiCiYuqUJRSVBLc1Q6aZ4VIAoNJY EdB96VwVlxlcI9u3Glnwjf1y =vMJq -----END PGP SIGNATURE-----