Re: Teach the hungry (Was: Hollywood Economics)

Dan Fabulich (
Thu, 03 Sep 1998 08:55:29 -0400

J. Maxwell Legg wrote:
>All money comes into existance as a debt. If all debts were repaid there
>would be no money. For more on the debt engine read "Billions for Banksters"

This is an argument against fiat money, not money in general. A gold standard, for example, would not have this problem, and unless you're attempting to tell me that gold I extract out of a mine I own is a debt to somebody else, that pretty much solves that problem.

>This story is good confirmation that all increases in money supplies are
>borrowed from private banks who print it for a fee. Based on this logic it
>pays the New World Odor crowd to promote violence in order to force the
>starving into crime simply to generate money by providing the prison system.
>Likewise when a ruler, say Clinton, orders that 16 billion be spent on the
>"War on Drugs" this is not tax money but a further expansion of the money
>supply. All debt is therefore a phony control mechanism and should be seen
>as such and got rid of.

And this is simply preposterous. Do you just make this stuff up as you go along?

Funding the prison system doesn't help the government make money. This is a bizarre idea and I don't know where you got it from.

Banks, by their very nature, make new money, by loaning out more money than they have. The Fed simply tells them how much money they can loan out in this way. (Whether the Fed should exist or not is a point which I won't get into here.) The money thus created is the BANK's debt, however, not mine: thats why if everybody tries to redeem their accounts at once, (called a "run" on the bank) the bank gets screwed: it owes all of these people money that it doesn't have.

Finally, increasing government spending does not cause an increase in the money supply. Increasing government spending causes an increase in nominal GDP and by doing so causes an increase in the demand for money. However, since the Fed controls the money supply, this just pushes up the interest rate, not the money supply. If the Fed doesn't like that, they might decide to increase the money supply to push the interest rate back down again, but there is hardly a causal relationship here.