DEBT episode 1: Debt, a great invention

[@clray123]

Debunking years of bs and new-age money conspiracy theories in a mere 15 minutes. Well done and thank you!

[@thestallionpt1]

Banks often lend more money than they currently have in their own accounts. Usually, they have (or make) enough money to cover whatever debts they have loaned (by charging intrest, or speculating on debt, or other forms of reinvestment). Occasionally, like what happened to many US banks in 2008, they do not have the funds to cover the debts they have acquired. In 2008 this happened in part because the banks loaned money to people who were incapable of paying the banks back.

[@TLMuse]

I wish this video described the role of collateral more explicitly. When the car buyer takes out the loan from the bank, the car is pledged as collateral. That must be part of the bookkeeping. I'd like to see that spelled out. It seems to be how money that is actually valuable is created-the value is linked to the collateral the bank has claims on. That is, when the bank makes the loan to the buyer, they aren't just saying, "Here's $200k; please pay us back." They make a claim on the collateral, bestowing value on that $200k of money created for the loan. Don't collateral claims play a significant role here?

[@wost81]

It is not true that interest payments would lead to a permanent imbalance (as some people claim here). Yes, the interest payment reduces the amount of deposits, but at the same time the bank makes a profit, i.e. bank equity increases. The profit is eventually paid out to the bank owners in the form of a fresh deposit (which again decreases bank equity) and the balance between debt and money (deposits) is restored. Tom Brown shows this mechanism using bank and household balance sheets. His blog is called "Understanding the basics of banking", the post called "Banking Example #10: Balance Between Money & Debt".

[@UniversalPotentate]

So far I like this. I'm not sure if they're going to veer off into more economic theory without discussing the idea of collateral and consideration. Knowing those 2 words is vital to understand HOW and WHY creating money as an interest-bearing debt is usury, harms economy and is how banks have come into power.

[@joerri]

Yes there is only creation of debt. And we use tradeable debt as our money. And indeed episode 2 explains that you can use a loan to create something (factory example) or use it so that people can buy existing assets (house example, but same scenario would be financial market). This pushes up prices and creates bubbles. That is the theory proposed in these episodes.

[@ClassicJukeboxBand]

The problem with debt based money is that the money creators not only charge interest on the money they create, they also use the profits to control governments, corporations, financial institutions, and the media. And don't believe they don't.

[@samuelgallop5193]

The participation of a modern bank in this original deal changes things subtly. The bank, when granting a loan ALSO CREATES a DEPOSIT which is nothing more than a CONTRACT with the debtor, which says that the debtor is a CREDITOR to the bank for a certain amount. Now the farmer HAS SOMETHING TO GIVE to the hunter so that he doesn't leave empty handed. The hunter now "owns" a creditor position against the bank. Now, a hypothetical fisherman can accept that credit and be himself a creditor of bank

[@joerri]

Because it does so through double entry bookkeeping. It increases its assets (loans) and liabilities (deposits). But the loans have to be repaid or else the bank has to write off its own equity. If you would like to know exactly how this works I advice the course: "Economics of Money and Banking" which you can attend for free on Coursera right now.

[@ChristopherReevesNZ]

Excellent presentation, nice work!

[@LuisDiuk]

12:09 "There is no inbalance in the system" that's up to the moment a lot of people default their loans, at that time that money created out of thin air will cause inflation, ie devalueting the value of the real savings of the people who hold cash, do you think this is right?

[@Jesus-kt5dc]

*The problem is that he said new money is being created, which is false.*

[@vafkamat]

very good video; clear and concise explanation of money

[@fritsaltenburg01]

A shame this series "forgets" to mention that the process of creating money is in the hands of commercial orgnizations. This means they work for a profit. The right to create money should be in the hands of an institutions that works in the interest of the public. Profits of money creation out thin air now go to banks and their stock holders. Profits of this process should go to the people in the form of lower taxes, better health care etc. THIS IS ALMOST A COMMERCIAL PRESENTATION FOR THE BANKS.

[@ovigzssheross8644]

perfect explanation , thanks guys

[@samuelgallop5193]

You are absolutely right. What came first, money or debt is IRRELEVANT. It is the conflate of the two that serves this professor Dirk to obscure the very dangerous consequences of a system which allows commercial banks to create widely circulated, indistinguishable means of payment WITHOUT relation to current true savings. He then goes to say that this is all well and good. IT IS NOT. As many before him in academia, he is either too ignorant and confused or blatantly in the bank's payroll.

[@mkooij]

this could be a conclussion indeed. these video's are great, especially because finaly universities are meddling with these issues (and a dutch one at that). I would like to see more in depth video's following these though where matters like interest, interest on interest, inflation are discussed as well as the facts that (most) banks are, like the person above me said, privately owned. one of the things that always seemed to strike me as odd is the fact that

[@Crussifiance]

The problem is not debt itself. It has indeed enabled our society to grow and develop by having access to money when we need it and repaying it at a later point. The true problem lies with fiat currency. Now, why the standard was abandoned and whose interests this serves is not as common wisdom and definitely beyond the scope of this discussion.

[@jasonwstone]

I thought this was a great concise explanation. I'm disappointed to see so many still don't get it. The shorter version is. Money never needed to be anything. If money is lent to productive things, there is no real inflation, no problems, at all, ever. However if money is lent to just hold other things, then it creates inflation through the interest and speculation. In the ideal, it is a free market way to give people incentive to do productive things.

[@joerri]

people will have to default yes and always some of them do. This is not massive crisis defaults we are talking about though. So yes a financial system where there is absolutely no risk of default, there shouldn't have to be interest. As you can see in the real world where some of the safest governments sometimes do not have to pay interest on their T-bills

[@joerri]

If a bank loan cannot be repaid the bank should write of the loan. If it does this is also decreases it's balance sheet, this also decreases the money supply. You are right that with money growth there is also debt growth. Hopefully a loan is used so that people can produce something. If you make sure that this always the case you have debt growth but also real growth to back it up. See the debt burden in ep 2 and 3.

[@AlexLopatenco]

Most of the things we have today were someone's imagination yesterday. I don't mind working to achieve something, but I hate begging for money to get treated (and I'm not the only one). We (mankind) have everything we need to live a good life, but it's hard to do, when all the power is held by some people with "money". Anyway, I don't want to argue too much... There should be balance in everything, but today we don't have it.

[@blattmacher]

Money creation does indeed lead to imbalances because interest and compound interest goes to those who produce debt regardless of any sense. Examples: 1. housing bubble, selling houses to people with no jobs, no money 2. carbon bubble, investing 7.6 trillion dollar in energy sources that can never be burned (if we want to survive) BTW: You should disclose the bank that has funded this project.

[@ledung7284]

Very good and funny videos bring a great sense of entertainment!

[@joerri]

To whoever the central bank loans money. Which is mostly other banks. Which can then relend this money (I know this sounds strange because they can 'make' money, but banks always have to balance their loans with a liability). Private and central banks work pretty similar however the central bank is the only bank that can print its money instead of creating it digitally.

[@EgypTPHONIX]

Man the dept from the ancient times is completely different the clay tablet (debt) could be exchanged for something very real (corn or meat) it's value was constant in modern times inflation happens because money is not real

[@devlieger01]

So clear and so easy to understand .Ty very much

[@joerri]

No. A bank creates a loan and a deposit through accounting. This is also why they are often called Monetary financial institutions by central banks. So for a loan of 10 million dollars the bank increases the bank account of that person by 10 million dollars. So it does not lend out money that it already has. It creates it as it lends.

[@joerri]

It "un-creates" the money when the loan is repaid. The bank indeed has to charge some form of fee, be it in the form of interest or profit share or fixed fee, to cover for the loans that customers default on. Such a system is technically possible with both deflation and inflation. However you are right that it has been badly managed the last years.

[@socialist11]

The economists should even question themselves what "the economy growes" means and "if money supply should increase for economy to grow". Cause I do not accept that if there are no loans there is no production. Many things you can start producing today even without any money. And I've already mentioned an example.

[@StijnDeWitt]

+Antinous Antinoos I think you hit the nail here. In the beginning of the video they are talking about barter and using loans to facilitate seasonal production trade. But you don't need a loan to trade, it can help cross the time gap. So there is value without money. Question is can there be money without value?

[@Jesus-kt5dc]

*I think both of you are sniffing around The Venus Project, a true economy.*

[@Mr9ke9]

I certainly hope Episode 2 explores the Fractional Reserve System. then on to CDO's and QE -

[@samuelgallop5193]

If you think that is the definition of deposit and how banks operate, then great for you. I salute you.

[@joerri]

Yes alright you can debate if all forms of credit can be defined as money. In our current system private credit or a security is just a promise to pay a bank deposit in the future. However bank deposits (seen as money in this video) is just a promise to pay cash. However cash is just a promise to.... a promise of what? It is a liability of the central bank which the government accepts as payment for taxes. Where do you draw the line what to consider money. Here it is deposits, which is debatable

[@joerri]

Actually paying a small sum of interest will always be necessary, because there are always some debtors who default on their debts. The bank does really incur losses from this because it is bound by the rules of double entry bookkeeping. Ofcourse this does not justify the excessive profits etc.

[@KelvinW344]

An economy based on gold, silver and other precious metals is bartering and not the current debt based money - a commodity that is neither decays nor can be created out of nothing.

[@joerri]

Ok so how about this: we can probably agree that once the financial system breaks down it causes a lot of economic misery as it is no longer functioning. So why is it so improbable that if it is functioning correctly it can allow us to work better together. Perhaps we had this global boom the past 200 years but curiously we can spot wealth in history whenever banking appears. Italian renaissance, Dutch golden age, british golden age.... etc.

[@markw999]

You're the one who's confused. The deer and the carrots in the example in this video are commodities. The promise to pay carrots in the future for venison today is a debt. A bit of clay signifying the debt is a security (securitized debt, we do it to this day). None of this is bad, but its also NOT money. And yes, the gold IS the money, which is why when you find that coin it STILL HOLDS VALUE! That's how you know it's money.

[@joerri]

My point was that (like in the episode) all of our money is and was based on debt. This is also true for central bank or government money . The question of who should have this power to monetize our debts has two sides. I can understand your point of view, but on the other hand a small bank can enable a community to monetize its debts, which can be very beneficial. Was it smart to give private bank such a strong profit motive? hmmmm, see ep 2,3 4

[@joerri]

You can create money, everyone can (try this software for example communities.cyclos. org). The main problem is to get it accepted. And in most countries the problem is that the law prohibits you from doing to without a banking license.

[@Mitjitsu]

What we have now in terms of innovation has happened *in spite of*. Not because of the bank controlled debt money system. The debt money system creates huge instability in the economy and stifles innovation, because people are less willing to commit to long term projects or invest due to an ongoing recession.

[@whatevernoticed]

No, not really. Take for example the Dutch Oost Indische Compagnie. They started to give out debt certificates to raise money to build ships and to finance the trips to the east. They then made a lot of money by selling the goods they got from the East. Those companies would never have been able to do so if they could not lend the money for it. Same with todays companies: they usually first have to raise the money needed to invest in innovations. They do so by lending money.

[@Mitjitsu]

whatevernoticed The problem isn't that they borrow money, but when the lender lends that money out of nothing.

[@whatevernoticed]

Mitjitsu Well, not entirely the case. He creates a debt that has to be paid back. And if the person or company that he lends the created money to does not pay him back, he has to pay back the debt himself.

[@Mitjitsu]

whatevernoticed Let me put it this way. How would you feel if I counterfeited £1000 and told you to pay me that back plus an extra £300. Would you feel happy about that situation?

[@whatevernoticed]

Mitjitsu Well, that is a wrong way of seeing things. Because by counterfitting money, you don't create the debt that i was talking about. Lets put it another way. Say that i want to buy some goods from you for €3000,00, but don't have the money. Then there are several things we can do. For example, we can get an agreement that i pay you the 3000 in 10 months. So i create a debt of €3000,00 and you accept it. But that means that you have to trust me that you get your value back in that time. Lets say that you don't trust me, but i still want the goods. We then can look for someone who you can trust to create the debt for me and pay you with that and trust me enough to pay the debt back to him. That 3rd person is usually a bank. By creating the debt for me, the bank is taking over the risk from you that i cannot pay the debt completely. So the bank wants somekind of safeguard to ensure that they don't loose a lot of money due to bad credits. And of course, the bank wants to make money from the service that he is providing. That part is the intrest.

[@joerri]

I am not sure if that is always the case. For example if the bank creates a loan and new money to finance the production of a new Maserati. Now there is more money but also more stuff that you can buy with the money. Does the price have to go up? I am not sure...

[@arnesarnautovic3679]

I don't find scary creating money out of nothing. What I do find wrong is that bankers (private persons looking out for their profit) are the one deciding will they create new money (which is needed for expanding economy) or not. Plus, as Irving Fisher in his book "100% Money" said, the peoples medium of exchange depends not only on hundreds of banks but also on millions of people willing to go into debt. Also, demanding interest (which does not exists) is crazy!

[@socialist11]

But this video is only meant as an introduction for the real topic he wants to talk about, the Dutch real estate bubble and what the Dutch government is doing to tackle it (nothing useful indeed) and they should be doing. So it's all about Episode 4 and perhaps that's why he's making all those simplifications.

[@joerri]

Okay I'm not sure if I understand you correctly. But where should the money for these shares come from? Currently all money is created by debt monetizing done by banks. But perhaps this is interesting to think about. Banking can be done much more locally. So indeed there would be no need for a big banking establishment. Think about starting your own local non-profit bank. You will still need to charge interest or you will go broke.

[@hoos.crypto]

The argument of money arising as a result of debt relationships is perfectly plausible, however such a money, exposed to counter party risk as it is, would always be considered to be inferior to commodity based money, or sound money, that arose in the market. When the two monies are confused as being identical the holders of the debt based money will ultimately suffer the consequences of their ignorance.

[@samuelgallop5193]

The only sensible thing you have said in 20 posts. Congratulations ! Now, how do you propose to do it without creating unintended consequences ? I'm curious !

[@arnesarnautovic3679]

"But where should the money for these shares come from?" The people create their own money. Nobody can prevent certain group of people to create their own money. The money should be electronic and centrally managed to avoid hoarding. Also, having centralised system would allow taxing the accounts instead of transactions. This would give incentive to spend or invest your money so money circulates. "You will still need to charge interest" People's money = created as free money = interest free.

[@samuelgallop5193]

So, what's happened then ? The dealer receives fiduciary media with purchasing power ( because he can't tell the difference ) and all hinges on the debtor's ability to repay the originating loan. IF the debtor then defaults, the bank is screwed and by the time the dealer wants to redeem his position against the bank, he will find with horror how the bank may not be able to fulfill its obligation. That is what happens when you use CONTRACTS as if they were money (GOODS).

[@eatcarpet]

So according to this, how can Bitcoin be a legitimate form of currency?

[@Jesus-kt5dc]

*It can't that's why a lot of people are going to get scammed by that ponzi scheme.*

[@matheusbreitenbach3920]

@@Jesus-kt5dc if jesus said, who am i to disagree?

[@matheusbreitenbach3920]

your answer is in part 14:00

[@joerri]

Because they do not really create it out of thin air but out of debt. And debt has to be repaid. If someone defaults on their loan the bank has to take the loss.

[@thefriendsofthevenusprojec3186]

What about the interest that the debtor pays? Where does that come from ??

[@Cromper]

The Friends of The Venus Project It comes from the promise that population will grow and more debt will be produced so our children will pay that interest - but inflation usually offsets the accumulation of debt. The problem is this: The whole economic system is reliant on perpetual population growth ad infinitum. Capitalism is a legalised Ponzi scheme. Have you ever wondered why Ponzi schemes are illegal? It's because they chip away at government sanctioned pyramid money-making economics that kid us into thinking that we have more money in our pockets when, in actual fact, the chocolate cake on our table is the same size even though we paid more money for it.

[@basgordijn9722]

Een belangrijk elementair punt dat niet wordt behandeld is dat met het afbetalen van de lening, het "geld / banktegoed" administratief weer wordt vernietigd. Daarnaast wordt niet de rente gecreëerd die ook moet worden terug betaald. In dit systeem komen we dus nooit uit de schuld. Dit is gecontroleerde oppositie.

[@samuelgallop5193]

Basic TRUE definitions: - Money is THE MOST MARKETABLE GOOD in the economy, that can be and is widely used as an intermediary in trade. Ultimately, all goods and services are PAID FOR in other goods and services. However, money ( A THING ) arose in the market to facilitate barter. - Credit/Debt is an AGREEMENT, a contract to provide future goods at a future date. A promise to pay, usually MONEY. Both can CIRCULATE and be accepted to settle transactions, BUT with very different consequences.

[@SlijterijSpraakwater]

In that case we come back to the openingpoint of the discussion. Banks create money out of thin air. If a client defaults on his loan, new money is created. If this isn't the case then only debt grows whit less and less real aquity to back it up!

[@joerri]

You are right most human credit relations are created with nothing more than a handshake and trust. I think the argument that is being made here is that it is possible to let a trusted third party monetize these credit relationships. This was the function of kings or chiefs. Currently this is what banks and central banks do.

[@joerri]

Ok, there are always people who default on their loans right (this is the key)? If the system is managed correctly the interest payments should balance out the defaults. Think of the interest payment as a transfer from the deposits of lenders to the deposit of the bank. If a loan (bank asset) is written off the banks own deposit (equity) is decreased, but for this to be possible it had to be filled with interest payments first.

[@Jesus-kt5dc]

*You sir blew my mind. My only question to you is. If the defaults is equal to surplus, where do banks make their money to pay workers and ceo?*

[@Willard_and_Wee-un]

What happens when you get caught in the loan loop where you get a loan to buy something but by adding to the money supply the money becomes worth less and you can't buy what you wanted because the seller raised the price so you have to go back to the bank to get more money thus adding more money to the money supply making it worth even less and the seller raises the price again ad infinitum? I remember when a Maserati only cost $4000.

[@joerri]

Sure: banks destroy money whenever a loan is repaid. Banks create money whenever they extend a loan. On average more loans are extended than repaid all the time. So the money supply increases

[@Naminukaz]

Explain your views and a fact that global debt is 313% GDP and is constantly growing.

[@joerri]

So what would be an example of commodity based money, or sound money?

[@presidentrepublic2479]

If you want to know about money and debt more clearly. Read book DEBT by david graeber. Debt is money

[@arnesarnautovic3679]

I don't think there is need for banking establishment at all. With modern technology if one has business idea by selling shares of a company that person can find capital. And if the people would have FULL control over their medium of exchange they could expand and contract medium of exchange to meet the needs of the economy. Say for example, loans for housing, expand, returned non interest loan = destroy. No inflation. Also, from where will the interest come from? Current solution=from new debt

[@BertvanDoorn]

Interessante video. Geeft een goed beeld over geldstromen.

[@markw999]

Another thought experiment for you: A hunter has venison, the farmer carrots. Let's say a kilo of venison is worth a kilo of carrots. Yet the hunter is gambling on the outcome of the farmer's crop (stray goat could make his claim worthless) and he has to go home empty handed to his family that day with just a bit of clay in hand. You don't think he'll want a premium for his risk do you? Of course he will - say 2 kilos of carrots for every pound of venison. Where did the value of the carrots go??

[@TechnocraticBushman]

One problem at 13:20 though, Money comes but it is loaned at an interest. And there are no money in circulation to cover that interest. If I, for instance, earn money to cover my debt, that money will go from another loan. So money can't quite go, can it? And bankruptcy is pretty much woven into the fabric of money based economics, is it not? And another corollary, debt can only increase. Since the bankrupt individual wants to avoid poverty, further lending.

[@samuelgallop5193]

then add contradiction to the list of concepts you don't grasp. I think it is fair conclude then, that together with Prof Bezemer, you don't find anything worrisome in the way commercial banks enter credit agreements. We disagree.

[@joerri]

I'm not sure if I understand you correctly so please say so if I don't. But I think that a bank always has to loan to make actual production happen. If it loans too much without the recipient of the Loan making anything real than that person will probably default on the loan. But Yes nowadays banks don't always do this and also provide big loans for speculative purposes (part 2,3,4) and I do not think this is particularly smart.

[@joerri]

The banks cannot carelessly increase the debt though because it has te be paid back. If not the bank will go broke. In the story the bank writing the check can be compared to the king writing on the clay tablet for the hunter and the farmer. So in your example the bank is not just simply writing down a number, in doing so it guarantees the seller that the maserati buyer is good for the debt. If not it will incur a loss.

[@joerri]

Yes the bank guarantees the debt of its customer. Therefore others will now accept the customers loan as money because they know the bank backs it up.

[@tbyles]

I'd like Dr. Bezemer to explain the criteria for distinguishing productive versus non-productive investment and credit. It seems like the criteria is arbitrary or at best posteriori. For example, are all home purchases using mortgage credit non productive? I think not. Would a mortgage used to buy land and build a house be productive, but a mortgage to buy an existing house non productive? The distinction depends on overstock, over supply of asset.

[@touyubeusr]

It's a pain carrying around credit cards and swiping them, can't there be a central clearing to hold them?

[@devlieger01]

No one forbid you to make your own money system .If you and your friends think you better trade and invest with gold why you not use it ?

[@hOtneO]

money is a container of time and labor. the more you have the less you work later. if you have none then you have to build up those tokens so you can rest later.

[@Jesus-kt5dc]

*Great comment.*

[@samuelgallop5193]

Now the fisherman has given away his savings to the farmer ( because he went back to him and exchange his deer acquirec on credit from the hunter ) and to the hunter who has paid him with that "bank deposit". Pity that he had only so much fish and misteriously DOUBLE the potential demand for it. He had to up the prices to clear it... A bubble in fish prices has begun...

[@hoos.crypto]

Check out the Austrian School for clear definitions on money and its origins. The main reason countries right now use fiat currencies is really a result of the events from the last 100 - 150 years and most importantly from the end of the second world war to 1971. It is a fact that all fiat currencies, especially those backed by debt and war fare, fail, with an average lifespan of about 50 years. People will always use sound money, and we'll need again soon once the dollar collapses under debt.

[@arnesarnautovic3679]

All the money inside is people's money (either those who borrowed it and are using bank money = electronic money, or people who deposited their money). When you get a loan and ask for a paper money you get money that belongs to somebody else. Just because the game seems to keep going does not mean it's right. Don't forget bank runs which can cause serious damage to economy having fractional reserve banking system. There are many critics of charging interest claiming that IT causes crises!

[@joerri]

It happens as in the balance sheet at 12:00. The bank makes an entry at the asset side of the balance +loan and an entry at the liability side + deposit. So both sides of the balance sheet of the bank have increased. Which means that the total money in the economy has increased. Out of keystrokes is referring to the keyboard that is used to make the accounting entry. Is that is satisfactory explanation?

[@mrzack888]

it's a double edged sword. liberalization of global capital also helped fund and spur China's or BRIC nations miracle economic growth.

[@tblackhandful]

sometimes you have to get loans to start up, its just the way it is

[@joerri]

A good constructive discussion is pretty hard on youtube as most users are anonymous. Perhaps the facebook page is interesting for you (lot of discussion is in Dutch but I'm sure the Dutch are able to respond quite well in English)?

[@hOtneO]

That's your opinion and if you don't agree with it that doesn't make it less valid. Children born into wealth don't have to work for the rest of their life because the money that represents someone else's time and labor is there for them to exchange for goods and services. Time=money. People born poor have to work to get that money that represents their time work. When someone talks about money at work it is phrased as getting your hours. This is a fact.

[@xiangchenfeng9660]

so the money is like a kind of claim right?

[@JanosAbel]

A good video as far as it goes. It is an account describing things as they are. But that is only half of the story. The "normative" side would question the rightness of giving the privileges of running what is essentially a monopoly to the private banking system. No other business has the power over the supply of such an essential service. What is missing from the presentation is the question of ownership. The company that prints our dollar or pound notes does not own them; why should the banks?

[@joerri]

Well the bank can create the loan by increasing their balance sheets. However they do this for a customer. This customer than has to DO something for someone else. So money can be created out of nothing, but this statement is indeed a bit misleading as it insinuated that this is a foul trick or that this money should be worthless. But this is not the case the money is backed up by a promise of the customer to the bank.

[@michellelewis3063]

'no imbalance as a result of money creation'?...interesting, what about interest? If private banks create the money supply, then the amount owed from borrowing this money into existence is always greater. This means that the money can never be paid back and debt must grow exponentially faster than the money in existence. This is itself a fundamental flaw or imbalance, leading to the necessity for economies to 'grow' to try to generate ever greater returns from peoples work efforts and taxes to repay the interest on the debt.....This is a ponsy scheme which facilitates the debt slavery of every human being on earth that is illegally unable to create their own money. 'Give me control of a nations money supply and I care not who makes its laws' - Amschel Rothschild. This is only a conspiracy theory if you are ignorant.

[@kanjitard]

+Michelle Lewis You are confusing stock and flow. Interest is a flow, measured, for example, in USD/year, whereas the amount borrowed (or 'created') is a stock, measured in USD. There is no imbalance because they differ in their units of measurement. (Travelling down a road of certain length (km) in a certain speed (km/h) doesn't cause an imbalance.)

[@michellelewis3063]

***** you are describing 'rates and quantities' and trying to assert that money creation is a quantity and interest is a 'rate'. This is not true, for at any given moment in time both are quantities and my assertion that debt is always bigger than the money created stands the filter of reality test.:)

[@JRD123456]

+Michelle Lewis "illegally unable to create their own money" "nothing else is needed for the creation of money than mutual trust, a system of accounting and some symbol of the loan transaction and credit relation." This is why I 'create' credit (money) with my friends all the time with IOUs + interest.

[@harrisjm62]

"This means that the money can never be paid back and debt must grow exponentially faster than the money in existence" This is actually totally fine. One persons debt is an others savings, additionally debt is something that is only paid back over time. There's no reason why all debts should ever be paid off at the same time. There will always be some sort of debt/savings in the economy because thats what money is. And as you yourself demonstrate, as long as the rate of interest is less than the rate of growth everything is in balance. The use of interest rates do have some other inherent issues though such as making predatory loans useful. Profit-sharing loans don't have that characteristic.

[@rinse-esnir4010]

+michelle No, it doesn't, like knjitard states, you confuse stock and flow. the interest is a flow of money, it is therefor perpetual.

[@smellypunks]

I am not sure about the debt token idea. Money is a store of value (man hours worked). Debt tends to have interest (% of value per month/year) which should not be asociated with money (a stable store of value). While at present currency is created as debt, which requires evermore debt the next year to cover the interest. I don't think this is the nature of money in itself. Working should add value to an econimy and so money should be a positive (store of) value not a negative.

[@Crussifiance]

Can you see how inflationary by design this is? And inflation is a tax albeit a hidden one on the real wealth of an individual. Now, viciously increasing the money supply has consequences (take a look at the historical graph for the US dollar for ex.) Now, in a system where paper money is worth less and less do do individuals who deliver services or make products to earn their wages benefit or is it the party that has card blanche to roll the printing presses as it pleases and get more of it

[@Crussifiance]

Ever heard of the Bristol Pound? I guess not :) Anyway, I am grateful people like you (ignorant and complacent) exist so that me and "my friends" can use you as a justification for the system to still exist. If people are not sophisticated enough to recognize it for what it is than I have no issue benefiting at the expense of them ;) I hope you have a very long credit history that over time erodes your real income so that one day you can wake up. Till then thanks for enabling my exuberant life.

[@hoos.crypto]

Gold is the money of kings, Silver is the money of gentlemen, debt is the money of slaves. Take your pick, your choice while you still believe you are free...

[@joerri]

So if I interpret this correctly a both a unit of account and a store of value has to be constant? But if that was the case what than could be called money? Carrots?... carrots can quickly lose their value in a season of overproduction? Gold, same story gold money suffered from huge inflation when the Spanish took ships of it home from south America.

[@mkooij]

(continued) is the fact that as things are now, to pay off depts, even more dept must be created. now i've seen these video's my line of thoughts goes to: ''this is the result of interest i guess"?

[@StijnDeWitt]

13:50: 'Nothing else is needed for the creation of money than: 1. Mutual Trust, 2. Accounting, 3. Debt Symbol'. Bitcoin proposes to remove Mutual Trust from this list. Do you think it is possible?

[@lambertj3]

Bitcoin has mutual trust, the trust of the strong algorithm.

[@Crussifiance]

Dear Prof. Bezemer, I am an alumnus of the RUG and as such have a lot of respect for teachers from that university. I do not mean to be condescending in any way but as one finance professional to another, I'd say you are massively misleading the general not-so-well-educated public. Ask any of my colleagues at the LSE or NYSE what is wrong with your "story" and they will all say that you are completely ignoring something we used to have that solved this problem - the gold standard!

[@joerri]

Ok let's say I am a bank and you have solid business plan. I loan you 220.000 euro. I make an entry for a loan asset 220.000 and a deposit liability 220.000. Now you can use the deposit however you like. But if it does not come back to me (the bank) my accounting does not work anymore (assets = liabilities). So I will have to write off the loan at the cost of my equity. Possibly bankrupting me if you where my only customer.

[@samuelgallop5193]

I wouldn't describe this as mischievous when it can be explained more simply as ignorance and stupidity.

[@samuelgallop5193]

Wow, that's a pretty good argument ! Get a clue, then you can debate the grown ups.

[@mrFizzboat]

Great video, well put together. However you have omitted one vital piece of the equation, that more money is owed to the issuer than what exists, the system requires more money to be issued just to stay constant. It's this exponentially growing amount over and above the principle amount owed that makes this system a ponzi scheme.

[@samuelgallop5193]

Quite simply, because he doesn't think. Let's take the original story. The hunter agrees to SURRENDER a PRESENT GOOD (deer) on exchange for the PROMISE OF A FUTURE GOOD (carrots). He leaves the deal EMPTY HANDED for now. That means he delivered his SAVED DEER and is not available now to be exchanged with let's say the fisherman. All he holds is a promise that will have to be fulfilled by the farmer through the PRODUCTION of new savings of carrots. The deal HAS NOT CREATED SHIT.

[@devlieger01]

Dus eigenlijk neemt de bank de beslissing voor de genen die het geld aanneemt van de lener ,of de lener wel zijn dienst of beer wel gaat leveren .Voor de service en het dat risico wil de bank rente .Klopt dat?

[@1scottsound]

For starters it's Not law It's a Legation,In most countries.So just start your own society 4 people should be a nuff.Declare it to the Company(The Government&All parties who you think might be of interest ) And start trading amongst Your 4 friends.See if it grows you never no.Journey well I wish you All the best.

[@joerri]

Ok but the 3% is also based on nothing else but debt right?