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THE BEADY EYE ASKS. WHAT IS BORROWING? WHAT IS MONEY?

22 Friday Jan 2021

Posted by bobdillon33@gmail.com in 2021. The year for change., COVID-19, Human values., Inequality., POST COVID-19., WHAT IS BORROWING?, WHAT IS MONEY?, What Needs to change in the World

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Coronavirus (COVID-19), COVID-19, Governments borrowing, Money and power., Money of the future, VALUE FOR MONEY, When Money Talks, World Economic Depression.

 

(Fifteen-minute read)

 

As you know the workings of the world of finance are screaming compilated.

All money is created as debt and destroyed when repaid.

Money originated as commodity money, but nearly all contemporary money systems are based on fiat money. ( Fiat money does not have intrinsic value and does not have use-value.) 

It has value only because a government maintains its value, or because parties engaging in exchange agree on its value.

There are three major theories regarding the origin of money:-

1 Money was created for trading purposes;

2 Money was created for social purposes;

3 Money was created for religious purposes.

Money is an unconditional means of payment, a token for wealth, worthless of itself, but symbolizing wealth because it is enshrined in law. It is then administered by Governments as a public resource, for and on behalf of the People.

Money today has no connection with earthly resources, and actually many earthly resources are diminishing while money (or at least the number on the pieces of paper) gets bigger and bigger.

I think we’d soon find out how money has stopped us from appreciating the true value of the earth we live on.

In the coming years, we need to get this reality of money out to everyone.

I imagine the scenario whereby ‘money’ in its present form disappeared in a flash, there would be no physical change in anything, just a lot of renegotiation.

With Facebook’s Libra looming on the horizon and the Covid-19 pandemic further depressing the use of physical cash perhaps it’s time for Central Bank digital currency (CBDC) to be introduced.

To give policymakers more effective tools to support the economy, particularly during times of crisis, while maintaining financial stability. Allowing central banks to distribute newly created public money directly to citizens rather than going through financial markets. 

What happens if the world does not return to normalcy within, say, a few years?

If so, governments will find themselves writing enormous cheques every month to sustain comatose economies. If that happens, all bets are off.

The bottom line is, we are not at the mercy of just a virus but a world economic depression with governments issuing epic amounts of debt. For now, confronted by an overwhelming emergency, governments have little choice but to engage in deficit spending on a giant scale, embarking on one of the greatest peacetime borrowing binges in history.

This is and should be raising many questions when it comes to borrowing, severely tests the question of how much the governments can borrow.

Apart from the tragic human consequences of the COVID-19 coronavirus epidemic, the economic uncertainty will likely cost the global economy trillions. 

In fact, the urgent question isn’t whether countries can afford to take on more debt. It’s whether they’re taking on enough debt to fund the stimulus programs necessary to avert an even deeper downturn.

There’s a degree of anxiety now that’s well beyond the health scares which are very serious and concerning. No matter how expensive an outpouring of government aid may seem right now, it is cheaper than dealing with a depression down the road.

After all, it consists of one arm of government creating money in order to buy debt issued by another arm of government,  which looks perilously close to a shell game in which central banks monetize government debt and distort markets. 

The amount a government can borrow depends on many factors, such as

  • Does it print its own currency?
  • Do markets trust the government to maintain low inflation and not default?
  • What is the interest rate on government bonds?
  • What is the state of the economy?
  • What is the purpose of government borrowing?
  • To what extent is the government borrowing from domestic or foreign investors?

Should we worry about the long-term effects of this new borrowing?

Without question, the new debt will leave taxpayers with a significantly larger burden to carry in years to come.

Some commentators believe debt-challenged governments may eventually be forced to go even further and turn to “helicopter money,” a maneuver in which central banks would simply create money, without issuing any corresponding debt, and the government would funnel the new cash to people and businesses.

The lender of last resort.

If there is no lender of last resort. 

The nightmare scenario where the virus continues to suffocate the global economy for a year or more would lead to the unpardonable sin of blurring the distinction between fiscal and monetary policy.

Disaster Capitalism.  

But until we win the battle against COVID-19, and revive our battered economies, we are in uncharted territory. Best to not rule anything out.

The economic impact of the COVID-19 coronavirus will be different than anything we have seen before. 

This is the calm before the storm.

How far can a currency fall before the government has to protect its citizens from the effects of a worthless currency? 

STIMULUS DOES NOT NECESSITATE EXTRA DEBT.

Money should become Man’s servant rather than his master.

In fact, central banks act as a broker between the governments and private bankers who lend the nation its own national currency at interest.

It does this by issuing gilt-edged bonds.

Markets are allowing all the major countries to borrow plenty at ultra-low rates of interest, underpinned by Central Banks buying up a lot of the debt.

This only has to change where inflation picks up, which so far it has not.

Inflation reduces the real value of the government debt, but, that means people will be less willing to hold government bonds.  

Inflation will require higher interest rates to attract people to keep bonds. In theory, the government can print money to reduce the real value of debt; but existing savers will lose out.

If the government creates inflation, it will be more difficult to attract savings in the future.

But in an economic depression, inflationary pressures vanish so it is much easier to finance a deficit by borrowing.

So do government debt and deficits don’t matter.

2021 will be the first year where the three main economies or trading blocs of the world – the US, the European Union (EU), and China – will refocus their efforts on fighting climate change.

Can the world afford this avalanche of new borrowing?

With the coming economic depression and the need to redefine our association with nature, while addressing climate change, and getting control of the pandemics there is no choice. 

It sticks out like a sore thumb if we are to win the war against this virus inequality has to be addressed by paying for the protection of our ecosystems.

In other words, to make it less profitable to destroy rather than to create. 

This can be achieved without the need to borrow with the technology we have at our disposal by placing a 0.05% World Aid Commission on all activities that generate profit for profit’s sake. ( See previous posts) 

All human comments appreciated. All like clicks and abuse chucked in the bin.)

 

 

 

 

 

 

 

 

 

 

 

 

Once society gains control of the issue of money, it cannot let the bankers issue money ever again. 

 

 

providing a safe public form of money and breaking the oligopoly that banks currently have on the digital money and payments system.

 

It does need standards and global agreements but the potential advantages clearly outwiegh the disadvantages.

endorsed digital currency is the way forward> this potentially is a great (and cheaper) way to distribute money to where its needed and this is more importnat than ever right know for obvious reasons.

Created money is already inflationary,

 


BORROWING COMES IN FORTY SHADES OF GRAY

a surge in misleading and unsubstantiated medical advice since the Covid-19 outbreak.

The first is that borrowing has been historically high in recent years following the financial crisis in the late noughties,

the deficit

GDP reflecting the need to spend and borrow to win the war.

Bank of England is buying in substantial quantities of the debt.

There is no need to count the interest paid on the debt owned by the Bank of England, as taxpayers and government get that receipt.

The debt taken on by the UK now has to be serviced by the following generations. And what are they getting in return for that debt? Just about nothing.

Quantative easing, which is bond buying by central banks

as it’s known in the jargon –

 

Covid is going to be around in the world for decadesa

possible total deficit of £7 trn by 2050.

By hoovering up domestic bonds, these central banks are creating artificial demand for bonds and thereby driving down interest rates (which move in the opposite direction to bond prices).

Central banks’ balance sheets are expanding furiously as they gobble up government bonds and other forms of debt.

 

 

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” Selling out ” is a part of life.

05 Tuesday May 2015

Posted by bobdillon33@gmail.com in Uncategorized

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Minimum Wage., Money and power., No Hours Contracts., Wages.

Imagine if the world map was redrawn not based on territories and treaties, but money and power.

This might be the best way to control the populations of the world.

It’s Not A ‘Law Of Capitalism’ That You Pay Your Employees As Little As Possible.

It is a choice.

Its a Fight Against Wage Slavery and Corporate Greed.

Greed clarifies, cuts through, and captures the essence of the evolutionary spirit. Greed, in all of its forms; greed for life, for money, for love, knowledge has marked the upward surge of mankind.

One company’s “wages” are other companies’ revenues.

Once you understand that “wages” become “revenues,” you can begin to understand what has happened to our economy over the past 30 years.

“Wages” aren’t just an expense line on a single company’s income statement.

Why?

Because the employees who are paid those wages use the wages to buy things–houses, food, clothing, cars, vacations, you name it. And in buying those things, they create revenue for other companies.

So, when wages go down as a percent of the economy, companies may get more profitable, but the employees paid those wages (or not paid any wages worth while if they are on No Hours Contracts at the Minimum Wage) have less money to spend. And that lack of spending power eventually hurts the revenue growth of most companies in the economy.

You don’t have to be a Professor of Economics to understand that producing stuff that the majority of the population can not afford leads to discontent all around.

The more income becomes concentrated at the very top of the economy, the less money is spent on the goods and services produced by the economy.

Because the people who spend most of the money–the average English or American–have less to spend the economy becomes greedier.

We are all being royally screwed over by bureaucrats, with their luncheons, their hunting and fishing trips, their corporate jets and golden parachutes.

Our companies have become extraordinarily profitable. But they have become extraordinarily profitable at the expense of their rank-and-file-employees, who have not shared in this prosperity and do not have much money to spend.

Only the companies’ owners have benefited with their shareholders developing a warped consensus that the only value that companies create is financial (cash) and that the only thing managers and owners should ever worry about is making more of it.

As a result, although our companies are extraordinarily profitable they are growing slowly.

Why?

Because the middle class–which contributes most of the work and most of the spending in our economy–has not shared in our companies’ prosperity.

The trend reflects growing concerns about the disproportionate spread of low-wage jobs in the U.S. and English/European economy, creating millions of financially strained workers and putting too little money in consumers’ pockets to spur faster economic growth.

Now you might think that all of this is hog wash but lets return to opening remarks of this post .

If we were to take the World according to Monsanto.

Seed can be owned as their property, royalties can be collected. We will depend on them for every seed we grow of every crop we grow. If they control seed, they control food, they know it – it’s strategic. It’s more powerful than bombs. It’s more powerful than guns.

If we take Google.

Every day that goes by Google becomes both more powerful.

Through G Mail Google stores and never deletes your email.

They catalog it and can do a LOT with that data. With time google can write robots to parse the data to find out every bit of data about you, who you know, what you talk about, etc.

G mail bundled with Orkut Google really has a solid grip on your social network with more detail and structure than email alone. Google knows who joebob62@aol.com really is, where he lives, what his pass times are, etc and can link it up with your email conversations. Now to get even further into your life they have the Google Desktop Search which has already been called on being invasive bypassing security on people’s PC’s and cataloging files that it shouldn’t.

http://onforb.es/1irxkWo

These are just two examples.

Certain industries dominate the global business landscape.

It is no surprise that banks and diversified financials still dominate thanks to their outsize revenues and massive total assets. The next three biggest industries are oil & gas (125 companies), insurance (114), and utilities (110). In terms of growth, the semiconductor industry leads all sectors in sales (up 11%); diversified financial companies in aggregate have an astounding 90% growth rate in profit; construction leads asset growth (up 18%).

Are we worried, not on you nanny.

Is the “commodity super cycle” nearing the end? All evidence seems to point to “yes.”

We have Governments elected to represent the people who are selling of your country assets for short-term profit to prop-up their shrinking economies. ( see previous posts)

We have world organisations that are total out of date, overburdened with bureaucrats, void of funds.

We have Media run by computers.

We have Sovereign Wealth Funds plundering the Earth for resources such as water, energy, land.

We have an English General Election in the next two days with the present Government that bailed out the Banks with Billions of tax payers money, now offering the share back to the tax payer at a discount. Somebody explain.

It’s no better across the pond.

In the USA they have turned war into profit. There are over 100,000 private contractors to run everything from security detail to weapons training to air surveillance of your enemies.

Normally, the military is accountable to the government.

Not so with private security companies. Private firms like Black Water and Dyn Corp have graciously offered to fill in the gaps.

Privatization is all the rage.

What we need is for the people of the earth to be represented, with sustainability, not greed.

This will never be achievable so why not make Greed contribute. ( See 0.05% WORLD AID COMMISSION)

Of course this in not the whole story.

There is the power of the Mobil Phone yet to be exploited by us not the other way around.  There is spending power probable more powerful than the vote.

“For the first time in many years, the people who put fuel in jets might just be able to buy a ticket on one.”

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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All comments and contributions much appreciated

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