INFLATION AND DEBT

Short Version

Information is needed. Simple Information. In a democracy it needs over 50% of the people to understand what is happening. This page is a necessary start. I would appreciate expert advice. I hope this short version will contain the essential facts.

Monopoly

We are all involved in a life size monopoly game – except i am just the top hat, you the racing car, we don't know the rules, and someone else has the dice.

The game of monopoly is accurate enough, in that money is made by property ownership, putting houses on the property and then renting them; it also includes the idea that owning public services is moderately profitable but it won't win you the game.

But it doesn't include inflation and debt – 'borrowed' or created money.

(It also doesn't include stocks and shares, and offshore taxfree treasure havens, but i believe these are secondary factors).

Creating Money

In the middle-ages, the local money lender would write out notes of worth which he'd make interest on. And these became used as money, and could then pass between many local traders. So, cunning money lenders started creating money, handing out notes which weren't covered by the actual money they had in their safes, and earn interest on non-existant money!

But it takes on a new dimension in the modern world. If a country has 2,000 people getting home loans of 500,000 euros, this means 1,000 million euros has been created, and if the country has a GDP of 10 billion, it means everything devalues and inflates by 1%.

Devaluation and Inflation

The only real measure of money is related to land and property. Devaluation and inflation are reflected in house prices. The more money banks create for homeowners, the less it's worth.

The principle of creating money and the consequent devaluation and inflation, is always the same. The actual valuables, the property, stays with the rich and powerful, the homeowners can slowly move into that category with lifelong work, meanwhile the rest of us are forced to work, living on trust and borrowed money – (with the promise to pay the bearer) – which is always worth less.

Anyone old enough will tell you in the last 40 years house prices have inflated over 10 times. This means that over this time the value of every dollar in your pocket or for the small time saver in the bank, has devalued 10 times.

INFLATION AND DEBT
long version

In order to educate myself, i read nurmerous incredibly complex pages, which claimed to be simple explanations. I feel sure that the essential facts only need a few paragraphs. Maybe the short version above is enough.

The Rise of Capitalism

Our story begins in Western Europe in the middle ages.

Wealth had the function of securing power and stability, and the Catholic Church and the Western States had a monopoly on wealth, riches, and land. This system endured by keeping subjects uneducated and in a state of poverty.

Then, accelerated by the invention of the printing press in 1451, the Catholic Church's monopoly on thought started breaking up, and the merchant class gathered momentum; a middle class which allowed anyone and everyone to accumulate wealth.

The middle class enabled freedom of class movement. It was the driving force behind capitalism and then democracy, notably with the American and French revolutions.

The Stock Market Crash of 2008

The Occupy movement in 2008 started because 99% of the population have to work more and more for our money, and then we had to bail out the banks; meanwhile the bank managers got big bonuses.

It's not really important to understand exactly why the crash happened, it's a sidetrack and a lot of people get lost in the detail.

However, in a nutshell, lots of financial firms lent money to people to buy houses. The only reason people lend money is because of interest on the loan so that there's an increased payback. So debts and loans are big business. Loans are a way to make money.

So then the financial firms budled 1000s of loans together and sold them onto financial giants (Fannie Mae and Freddie Mac). And then it's all to do with diversifying risks, and insurance policies which pay out loads, when what was considered as low risk events happen.

However, the initial loans had been made to people who were not financially secure and so there was an enormous default on payment and everything broke down.

It wouldn't have mattered so much if just small private firms had gone broke, but now the very centre of the financial firms on the stock market was involved. This led to the bailouts: the creation of new 'borrowed' money by the government.

Borrowed money is state-issued money declared to be legal tender but not related to the gold standard or fixed in value in terms of any objective standard. Banks produce it whenever a country needs more, but this leads to 'national debt' devaluation and inflation.

Monopoly

We are all involved in a life size monopoly game – except i am just the top hat, you the racing car, we don't know the rules, and someone else has the dice.

The game of monopoly is accurate enough, in that money is made by property ownership, putting houses on the property and then renting them; it also includes the idea that owning public services is moderately profitable but it won't win you the game.

But it doesn't include inflation, debt ('borrowed' or state created money), and offshore taxfree treasure havens.

Time

When the market started, time was measured by the moon. Then came the industrial revolution and the invention of clocks. And now the markets measure our time in nano seconds.

So these days, Mr. Big makes more deals in less time.

Inflation and Debt

The Roman Emperors were among the first to discover they could increase their own actual wealth and pay their debts by decreasing the amount of silver in the denarius.

Even before the rise of capitalism, the local money lender would write out notes of worth which he'd make interest on. And these became used as money, and could then pass between many local traders. So, cunning money lenders started creating money, handing out notes which weren't covered by the actual money they had in their safes, and earn interest on non-existant money!

But it takes on a new dimension in the modern world. If a country has 2,000 people getting home loans of 500,000 euros, this means 1,000 million euros has been created. And then with 1,000 million more in circulation if the country has a GDP of 10 billion, it means everything devalues and inflates by 1%.

There are many examples of countries over production of money leading to inflation. The Treaty of Versailles laid a war debt on Germany which necessitated a production of marks which led to an inflation and devaluation of over 400,000 million percent in the four years up until 1923.

3,000 years ago when it started, military warfare was a method of gaining property, now wars just cost money. The USA has enormous debts due to its wars. In 1971 during the Vietnam war, Nixon cut all connection between the dollar and the gold standard. the USA is now apparently increasing the supply of dollars at a rate of 7.7% per annum.

The only real measure of money is related to land and property. Devaluation and inflation are reflected in rent prices. The more money banks create for homeowners, the less it's worth.

The principle of creating money and the consequent devaluation and inflation, is always the same. The actual valuables, the property, stays with the rich and powerful, the homeowners can slowly move into that category with lifelong work, meanwhile the rest of us are forced to work, living on trust and borrowed money – (with the promise to pay the bearer) – which is always worth less.

Anyone old enough will tell you in the last 40 years house prices have inflated over 10 times. This means that over this time the value of every dollar in your pocket or for the small time saver in the bank, has devalued 10 times.

Up until around 1970 a housewife and family could be supported by a man. Now both parents need to work to earn enough money to support a family and pay the mortgage.

For most of us, the production of borrowed money is just increased pressure on our lives. The new home owners break even after 40 years work. And for the 1% who own the property, or broker it, it's a way of making more money.

With the work of our parents generations and their intentions for a better future, there is enough for everyone. But debt and inflation means it all costs more. We would all have lots more free time and less stress if we weren't being made to work more and more.

No-one tells us the Rules

There is a lack of simple information about these matters, and there is no demand for it, it all seems to complicated to worry about.

A big problem is that there's a lot of normal hard working people who simply dont want to worry about money. There is something socially distasteful, a sort of morality that one shouldn't worry about money and should be happy with what one has.

This attitude has been endorsed by schools which educate us to work for the beaurocracy, or at least learn a trade; which is ultimately all to do with keeping the system going for by Mr. Big and his buddies. How much are they responsible? The newspapers should have told us in the 1920s. The Radio in the 1940s and the BBC in the 1960s. But still in 2022 no-one tells us the simple rules of the game.

Normal people do complain about shortage of time, health care, pensions, and education etc., but don't seem to connect this to money; and if they do, they don't see the consequences of the continued creation of more borrowed money.

It makes me angry when i realise how my life and my culture and it's attitudes have been compromised, accelerated and conditioned by this spoilt child who is now running our world.

How can we stop these rich kids who have this power and are making all our lives stressful, monopolies that raise prices and cut wages and mechanise manpower, the Henry Fords who make production efficient and lives boring and pointless.

The carpenter used to feel identity and his own worth by making his own table. Now he makes the legs, another the top, another varnishes, another sells it, and the only one who really profits is the boss who owns the shop where it is sold.

I suspect that the only real difference between the legal and illegal syndicates are that when you're incompetent, the illegal ones will kill you off ! Murder seems rather impolite and violent revolution is old fashioned.

Information is needed. Simple Information. In a democracy it needs over 50% of the people to understand what is happening.

Financies are a key driving factor in The Exponential Rat Race.
The connections between this page and Population and Inflation are interesting but i don't fully undertand them, i welcome your ideas.

Please continue with The Exponential Rat Race

Back to Chapter Three : Civilisation's Habitual Ruts