Quote:
Originally Posted by Akazukin
I strongly disagree with the movie. Money is not loan, it's a trust and it has a value. Obviously, the more money the government have printed, the less value. Which is why there is an exchange rate. e.g. 1 million = 100 million yen!
The movie is playing with maths to confuse her viewers. Imagine one day where the US government suddenly gave you and everyone 100 million USD. Will you feel happy about it? You'll worry that the 100 million can no longer buy you a piece of bread. You'll do your homework, to find out it's real value. In the movie, the bank accepts 100 million straight with no questions asked, it finally led to lots of strange theories.
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It is true, the economic theory posed by him is partially incorrect - yet your view isn't much better.
The basic principal discussed is how fractional reserve banking increases the money supply. This happens when the 10% reserve is taken from the deposit to be kept as the reserve for withdrawal and the rest is loaned out and continued by this cycle.
The premise is that all money is created this way, and that the Fed creates the money used in this transaction of government bonds. This is false.
First of all, the Fed does not create the money, the Treasury Department is in charge of printing money. The Fed will decide to increase the money supply and thus the Treasury will print the money.
Second, money is created as a debt to the US Government. Not all of it is based on loans. It is created with out interest, however our government does pay interest on the debt issued to those who buy bonds (which is paid to the bond owner as interest). Anyone can buy government bonds.
The other major error in the discussion of how the financial system enslaves us is debt and inflation. These things are drawn out to be bigger problems than they really are.
First, Inflation at a steady rate is natural, and does not harm anyone. Unexpected Inflation does. The reason for this is that when inflation is at a steady rate, loans and prices of all goods and services will adjust to that expected inflation rate, and thus it has absolutely no effect on anyone except for fixed income earners (most of those don't exist because of COLAs or Cost Of Living Adjustments for those on salaries). Thus a steady rate of ~1% inflation, which is what we have had for a very long time, is healthy.
Second, debt. Debt is a term used with a negative connotation too frequently in this movie. They assume that everyone must get loans, and that everyone must pay these back with interest and actually afford to do so. Debt is perfectly fine, and the reason why the United States will always be in debt, even when we have a "surplus", is because all money created is debt of the United States. Thus, there is no reason to call this debt bad. Debt will stimulate our economy, create jobs, and increase GDP. Only when we are at the far end of our production possibility curve, is new debt detrimental because it creates unexpected inflation which is not accounted for in prices, and our dollar's buying power is greatly reduced. However the debt of the money supply is not detrimental because if the supply of money is expected, so is any inflation caused by it.
If you know about old economic theory, and the whole picture in general, Keynes suggested an AD-AS (aggregate supply - aggregate demand) model that had a horizontal AS line that would mean any increase in government spending or an easy-money policy would not effect the price-level (increased inflation) and would only lessen unemployment and increase GDP. This is true and only true at a time where there is a recession, like the one we are headed towards now. The way that we will pay for this debt, over time, is with inflated dollars, which will be anticipated and accounted for in the price level in the long run.
The government, unlike suggested by this movie, will not go bankrupt. It is following the business cycle, which includes recessions and growth periods. Sadly, something wrong happened for us to be heading down a recession this hard, which is why the economy is the number 1 issue in the election. However, if no action is taken, the economy WILL rebound - it just may stay in a recession for longer. The 700 Billion bailout only adds money to the market to slow this recession, and to increase the elite's wealth gap if you want to think of it that way.
Sorry for the long post and possibly confusing you - if you need me to clear something up (or any mistakes), let me know. Did this while I am sleepy.