The Simple Mathematical Flaw in Modern Economics
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Simple Mathematical Flow in Modern Economics
Most people believe that interest is natural to money. However, the way in which money is created determines whether interest is applicable or not.
Two forms of money creation have dominated over the last 5000 years -- creating money out of credit and creating money out of gold or silver - with humanity going back and forth between centuries-long domination of credit money and centuries-long domination of gold and silver-backed money.
Credit money is newly created on the back of borrowers' creditworthiness. It is debt obligations enforced by civil law and backed by provisions for bad debt. Since credit money is legal agreements that require only paper and inexpensive credit risk insurance to create, credit money doesn't have to be borrowed from anyone and therefore doesn't attract interest - credit money is interest-free.
On the other hand, gold-backed money cannot be created as required by the demands of trade - the supply of gold-backed money is limited to the amount of gold in the world. Therefore there's not enough for everyone to trade their goods and services with. Those that are short of gold-backed money have to borrow it from the few that hold the world's gold-backed money and pay them interest for doing so. Gold-backed money bears interest.
The amount of credit money created matches what borrowers can afford and hence matches the amount of goods and services traded in the economy. Credit money is also backed by provisions for bad debt. Therefore the creation of credit money does not contribute to inflation. The gold supply, on the other hand, has no relation to the amount of goods and services traded in the economy. Gold-backed money is therefore inflationary and deflationary.
Simple Mathematical Flow in Modern Economics
Most people believe that interest is natural to money. However, the way in which money is created determines whether interest is applicable or not.
Two forms of money creation have dominated over the last 5000 years -- creating money out of credit and creating money out of gold or silver - with humanity going back and forth between centuries-long domination of credit money and centuries-long domination of gold and silver-backed money.
Credit money is newly created on the back of borrowers' creditworthiness. It is debt obligations enforced by civil law and backed by provisions for bad debt. Since credit money is legal agreements that require only paper and inexpensive credit risk insurance to create, credit money doesn't have to be borrowed from anyone and therefore doesn't attract interest - credit money is interest-free.
On the other hand, gold-backed money cannot be created as required by the demands of trade - the supply of gold-backed money is limited to the amount of gold in the world. Therefore there's not enough for everyone to trade their goods and services with. Those that are short of gold-backed money have to borrow it from the few that hold the world's gold-backed money and pay them interest for doing so. Gold-backed money bears interest.
The amount of credit money created matches what borrowers can afford and hence matches the amount of goods and services traded in the economy. Credit money is also backed by provisions for bad debt. Therefore the creation of credit money does not contribute to inflation. The gold supply, on the other hand, has no relation to the amount of goods and services traded in the economy. Gold-backed money is therefore inflationary and deflationary.
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Traditional diplomacy was about government-to-government relations. Modern diplomacy is more about people-to-people relations. And culture is central here.
Top Future Technology:
Traditional diplomacy was about government-to-government relations. Modern diplomacy is more about people-to-people relations. And culture is central here.
Top Future Technology:
Babu Rao
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