Try again
Refs: Masters Degree in Economics from University of Durham
( buffet_the_appetite_slayer ٩(●̮̃•)۶ jacked in to the ICE on, Fri 17 Jul 2009, 13:17, 3 replies)

balls
in your court...
Please read the primers on TAE, then get back to me as to why we're not about to hurtle into a deflationary spiral.
Qualifications? Ben Benanke's got qualifications...you will have been taught 'the system', and a chicago/keynesian version of it too methinks.
(Countryslicker, Fri 17 Jul 2009, 13:25, closed)

Wait, what?
Which? Chicago school or Keynsian?

The squeaky pip at the core of the apple of your wrong-ness is your assumption that the actors in your system can only pay off their debts by borrowing money from other people. Since this is fundamentally not the way the world works, your theory does not stand up. It's almost too obvious to state, but just in case you really don't get it, money usually comes in exchange for the production of goods or the rendering of services.

Kids, two things: don't get your education from a wing-nut blog, and don't confuse use of jargon with expertise.
( Scrumper, Mon 20 Jul 2009, 17:02, closed)

A-ha,
But surely the base point here is that the Earth is finite and therefore can't possibly provide enough goods for ever-increasing (exponentially from the sounds of things) debt.

Does no one look at the big picture or have I got it wrong/simplified it too much?
(Shippy likes linebreaks and doesn't care what you think, Tue 21 Jul 2009, 23:46, closed)

that's
the bottom line, yep compound interest = infinite growth in a finite world, something's got to give.
The unstoppable force meets an immovable object.In this triptych the three components are finance, oil and the environment - in that pecking order. The other two will come to bite us when we try to recover but for now the tsunami about to come ashore is financial. We're at the 'ooh look, free starfish' stage.
(Countryslicker, Wed 22 Jul 2009, 10:00, closed)

No!
Compound interest does NOT equal "infinite growth in a finite world." The main reason being that very little of the money in circulation in the world is subject to the effects of compound interest. Most money is spent on goods and services, things that people, companies and governments need to survive.

If every single person, company and government in the world put their money on deposit and never spent any of it on anything ever, you might think you'd see that compound interest would be a problem. But, actually, you would find that interest rates turned negative because nobody would want the money anymore and it would be more valuable now than in the future. The 'problem' you think you've found is inherently self-limiting.

Please widen your reading to include some of the basics of the 'system' before brandishing such a narrowly-held theory.
( Scrumper, Wed 22 Jul 2009, 13:29, closed)

OK
You've settled down a bit, I must admit I was a bit baffled by someone who could use 'non sequitur' yet struggled with prasee, apols for the ad hominems.

The exponential function implicit in compound interest does represent potentially infinite liabilities. All mortgages are subject to compound interest which is why you end up paying back 3x what you borrowed, or there abouts - or why credit card debts 'spiral out of control' when people can only afford the minimum interest, not capital repayments. All those stories of people borrowing 100s, yet owing 1000s?

Most 'money' is not spent on goods and services, it's shuttled around in the shadow banking system, iirc something like 95%+?

You've lost me on your logic in the scenario re 'put money on deposit' - what about the scenario where no one can repay capital and there is effectively no money - not the same thing at all.

At the moment there are more bad bets out there than there is money to repay - I don't see the scenario about everyone "banking" playing out.

Negative interest rates is an interesting one, it's been muted as a possible solution to the deflation we've just hit. I don't see people putting money in a bank when they only get back 98.5% (e.g. with nominal rates of -1.5%) unless this was to guarantee they got *something* back. This would be effectively like paying the bank 1.5% to avoid having to put your cash under the bed. Might be an option in the future.
(Countryslicker, Wed 22 Jul 2009, 15:16, closed)

Oh come on, how does that qualify an opinion?
Which you haven't given anyway, expand on why he's wrong if you want us to listen?
( Brandy_Bumwinkle, Fri 17 Jul 2009, 13:29, closed)

Actually...
I don't think you need even that. I can't remember much about it, but I do remember enough of my A-level economics course to smell something fishy about the OP.
( Enzyme is powered by sunlight, Fri 17 Jul 2009, 13:34, closed)