Let’s says this film is correct. Other than a Greek style protest, what can I/we do about it? Probably very little right now and not nearly enough by the time it’s too late. But if the film is wrong, all is well, economies will continue to grow and the only downside will be the tiresomely incessant conversations about how we remember when a glass of beer was only $1 and you could drive all the way around to world on a single tank of petrol.

I certainly feel there’s a better way to do commerce than our current system so that at least the PERCEPTION of unfairness is reduced. Even better would be to achieve an ACTUAL fairer world (sorry to sound like a beauty pageant contestant). Calling for a fairer world though only raises the question: what is fairness? You can’t change a great deal without a strong moral imperative so for me, for quite some time now, fairness is the real question. It’s seems to be what all the economic debates you see in the media boil down to.

This goes for interest rates especially. Central Banks have no idea what debt is worth day to day yet they set rates for debt as if they did know. Looking at the collapsing mess in the EU we can see that central planning like the Soviets did simply does not work; never has.

There is no need for “new money” as created by the central bankers. This is called inflation or better known as debasing the currency, a cancer that eats away at whole nations. Prosperity [growth of the economy] is caused by the higher velocity of money not by the greater volume of inflated money sitting on bank balance sheets; like we have today. Inflation is a fairly new condition of modern history and always caused by central planners who don’t know what they are doing.

During this hundred years we even had a lowing of costs due to improved productivity and inventions. What cost a nickle in 1813, cost a little less than a nickle in 1913. However, since then we have endured a 98% inflation period; what cost 2 cents in 1913 costs a dollar today. The central planning method of managing economies will always fail. The free market never fails to set the correct price on any scarce good. Central planners always get it wrong since they have imperfect knowledge of what people want minute to minute.

2) Yes, the system of adding interest due that is not created can be maintained as loan as more value is being created that encourages more loans – this is why the system has lasted through the industrial and agricultural revolutions that we’ve had since its’ creation, although the balance of outstanding debt still grew exponentially. That’s why the post-WW2-1980 period of steady American growth worked in this system, until accumulated debts forced us to depart from the gold standard, and even for a while after. The problem is when we start to run out of oil or other base goods and when even with advances in technology can’t produce ever more goods and services. At his point there aren’t good lending opportunities, but accumulated interest is still due. Part of the reason why banks have put there money into increasingly speculative derivative bets from the 80′s on (aside from as you point out, we let them), is because what they make from loans is decreasing, but speculating creates temporary asset bubbles that still make profit possible still – if speculation wasn’t allowed, our money system would have shown its’ coming to an end quicker as it would have been apparent much sooner that lending profit had decreased below 0 as people couldn’t come up with enough resources for enough to pay back principle and interest to subsidize the ones that defaulted anymore. Not that speculation is a solution; it ‘kicked a can’ while enlarging a bubble and the size of the eventual collapse.

Yes, we should also not allow banks to gamble with government insured funds as the elimination of glass-steagal allowed. No, this will not solve all the problems of our money system being unsustainable or inequitable. The crash is only inevitable or could only be fixed when it happens by creating a money supply created by and for the people, not private lenders.

I agree with your distrust of government, but don’t necessarily believe this means a gold-standard is what’s needed. You assume gold’s intrinsic value, but guess who gave gold its’ original value? An often overlooked piece of monetary history is that mankind had about 3,000 years of the quite stable cow-standard before power centers of the day monetized gold. This is what the ancient Mesopotamian and Egyptians used, although trade evolved to include first the ox/wheat ratio, then tables of set exchange values for predominant goods. Silver by weight was one exchangeable good; gold was not but was always accepted as payment to some ancient temples that grew in power. Eventually these temples issues stamped bars of gold, performed rituals that assigned it value greater then gold by weight, accepted only gold for payments of services the communities depended on, and thus monetized gold. These bars evolved into coins as these temples became foundations of the ancient Greek gov’t. The Romans also used the coin currency, and under Ceaser the value of stamped gold (as we hadn’t invented paper to stamp) was revalued at twice as much silver. Rome used its’ military might to give itself the sole power to coin gold, to make itself the worlds reserve currency, and to give the state the sole advantage of trade with the East, where gold was still worth half as much in silver – assuring that Rome could trade for 2x as much gold in ancient India then in Rome. Unfortunately this caused a steady loss of silver – which more decentralized powers were allowed to coin – to indies. This method as well (as many actively destructive mechanisms like conscription into endless warfare, debt causing first the loss of land then freedom of the average citizen, later inflation and high actual tax, etc) allowed gold to accumulate amount with the elite in the cities that governed Rome while trade throughout the huge territories of Rome was severely stiffed by incredible scarcity of the money supply; the Byzantine empire all the way until the Venetians is called the great silver famine. With the absence of the medium of stored value the Venetians may have had some justification at the time to pioneer fractional reserve deposit banking; indeed the presence of additional debt-based money supply helped the Venicians thrive over other cities with just shortages – also, the Venetians were able to tap into the gold/silver ratio trade between the west and the east and fought to maintain these routes. However fractional reserve banking did not dissipate after the Venetians/knight Templar destroyed Constantinople – the last great Roman city – and took all the stored unproductive gold to put into circulation – not even later when governments prevented many forms of usury – not when the influx of gold came from the pillaging of the Americas -instead this method of deposit banking multiplied throughout societies, creating money supply in addition the the gold coins issued by power centers that the populace still understood to be the sole currency.

What does this brief overview of history show us? First, that gold derives only a small part of its’ value from commodity value and much more of it from the Stamps that Governments issued in coining it and monetizing it. It is therefor primarily fiat and the consistant value of the monetized gold is only as stable as the state that coins it and decides its’ value. Gold is inherently scarce, but this doesn’t just help create value, it can destroy trade in the wider population if the limited supply becomes to concentrated for centuries or until a money supply is replaced. It also causes misallocation in resources as mining and coining a useless resource is prioritized over creating ones with economic values in themselves; this prioritization has also been used to justify horrific genocides and enslaving of populations. These are some of the reasons some prefer currency created by sovereign states to today’s currency created by banks and even over gold currency. Of course these aren’t the only options – digital currency, as mentioned, is purposed as a way to eliminate some of the risks of state corruption, and no one said that for a currency to be fixed to a commodity it has to be gold – imagine going back to the ancient Mesopotamian system and creating a unit backed by a a basket of standard-exchangeable commodities, like cows and wheat or rice and corn. This would be much more valuable then gold especially among the developing worlds populations and could serve as a reserve currency and would be backed by goods that are widely dispersed throughout the world (much harder to centralize control over then fixed supply of gold), that can reproduce (solving the where does interest on loans come from problem), that is inherently needed by the earths population (solving misallocation in production), and grows in supply only as our resources grow in supply (no inflation from issuing currency faster then resource growth; no sniffling or deflation from fixed supply of gold not growing with capacity to produce resources).

Anyway, this movie makes us think of other possibilities…certainly documentaries solving the same problems with money with a gold-standard are also available, but I am glad to see a wide range of solutions being presented; this means society is starting to have the right conversations at least.

Opinion by an Id*ot

1. The creation of money is soley under government control (at least for most of the world) by the means of central banks, who have the exclusive right to create new money. Other banks can indeed create new ‘promises to pay’, but they need to back it up by a percantage of actual money created by the state (reserve, liquidity, just search for these things).

2. Yes, the central banks take a interest rate for money they give out, BUT the actual economy, the economy of material goods, grows. This means for instance, if I invent a fuel that is 100% more effective than previous ones, everybody would end up paying just half of what they used to be for fuel. This would save them money which they could use to actually pay these debts that are deemed unpayable in this strip. In fact, inflation occurs if interest rates of the central bank are too low to counter growth (growth as you can see means new technology and increase of effectivness).

In the end the real problems leading to the current crisises are not mentioned at all. Now I will come back to be left. The real problem here was a weak state that knowingly allowed banks to give away ridiculous amounts of credit cards and loans, that allowed investment banks to become so enormously big that they need to be considered ‘too big to fail’ (also so big, it removed much of the competion) and a state that was believing in growth rates that were just non-existent. You can see this simply by looking at a US senate comission interviewing state financial regulators: http://www.c-spanvideo.org/program/CrisisandB

The idea of digital money is nice but it is flawed, simply because of technical difficulties. A gold standard is also no reasonable alternative, because there is not even enough gold in the earth crust (meaning all gold that will ever be available) to equal the amount of existing valueables in one bigger nation like the US or China, while furthermore gold is also useful for the industry. In other words: I dont want to pay 500% more for my cellphone, just because gold is our currency (yes there is some gold in your cellphone, but not much).

What we really should do is strenghten restrictions on finacial markets (this is maybe even the only market that needs extreme restrictions), like it was before (!) the ‘deregulation’-era of the 1980s. To support this I can bring simple proof: no financial crisis soley introduced by the financial system itself between 1929 and 1983, going well with legislation changes around both dates. In fact the legislation that was introduced after the great depression (1929) to prevent this from ever happening again was removed by Reagan (early 1980s) immediatly leading to the first crisis. Even more: in 1929 the US had a gold backed currency, still the great depression occured. Gold standard was finally turned down in 1971, not leading to an imediate crisis.

By now, December 2011, the total crash of world economy is almost inevitable, but I still wanted to inform you were the real problem is.