Yes, this is absurd, since money is needed to pay the interest, and a good point.
That is why many economists are warning against the collapse of system, and that is why the system needs endless growth to function, which is not possible.
when is collapsed, the banks will have the whole country.
Till then, more and more wealth is tranfered to the banks.
Didn’t we already have a long thread about that? A safety deposit box is not a checking account.
You’re confused. People that lament “debt backed” money do so because they want “debt free” money. That means they want the government to create fiat money and hand it out.
Money is debt backed because of how the monetary system has evolved. In the past, when money was specie and bills were used to represent specie, the money supply was expanded by pyramiding deposits; by having a single gold dollar backing several paper dollars. Today, even though dollar bills no longer represent gold, money is still created in the same way, by pyramiding deposits; a single physical dollar bill backing several dollars worth of deposit balance.
A debt free money would be one that is simply created new and then spent. Newly created debt free money gets it value from government violence(ie legal tender laws), while newly created debt backed money gets its value from deception.
The Federal Reserve System adds another inflationary layer to an already unstable banking system. For example i_f the central bank has $100 worth of gold reserves in its vaults and a 10% reserve requirement, it can print up $1,000 of new notes in deposits, which become the reserves of the commercial banks._ The c_ommercial banks take this $1,000 and, if they’re required to hold 10% again in reserve, they can multiply the $1,000 into $10,000 through fractional-reserve loans_. So an inverted pyramid is created with $100 worth of gold, or real money, at the bottom and $10,000 of inflated paper money at the top. As this $10,000 of new paper money circulates in the economy, it drives prices up, therefore reducing the buying power of ordinary citizens.
as i understand this excerpt…a commercialbank goes to centralbank with an amount of real-money - the centralbank takes this amount of real money calls it reserves and permits commercial bank to create 10x the amount of their realmoney as creditmoney.
also when commercialbanks aquire realmoney in deposits, centralbank regulation can dictate commercialbanks to keep wahtever reserve they are required to on hand - a commercialbank will often loan away 90percent of its realmoney and keep 10 percent as reserve while creating creditmoney in deposits of what they have loaned out.
to the extent that the centralbank ‘permits’ commercialbank creditmoney, interacts with it and makes purchases with it in leage with govt etc…i guess you could say that the centralbank inflates as well as commercialbanks.
i assume the linked information above is true – i am not sure.
I first came across Austrian economics in 2000 when I started reading LewRockwell. I didn’t start studying it in any depth, though, until a few years later, say 2004. I went to Mises U a few years ago, then 2 years ago went to the David Gordon seminar and FEE’s Austrian seminar, then this summer went to the Advanced Austrian seminar at FEE. It depends on how you define “practical” - I use Austrian thought in my research as a grad student in math focusing on emergent order and complexity (in the context of mathematical logic.)