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Rajiv
01-23-08, 04:49 PM
From Hypertiger

Fractional Reserve Debt Inflation (http://hypertiger.blogspot.com/2007/12/fractional-reserve-debt-inflation.html)


The psychology bubble is the biggest bubble…A key indicator of the health of the economy is the DOW and NASDAQ…Not to you and me but to Joe Q public…

But Hyper…Hyperinflation will ignite with low interest rates…

The only way to ignite and maintain hyperinflation is by printing cash and distributing it in massive quantities…That is not how this system currently works…

The floating exchange rate debt backed by debt fractional reserve system has a maximum potential to inflate debt…

The previous system…the Bretton Woods Gold backed fractional reserve system also had a maximum potential…Gold was pegged at $35 an ounce so under the previous system as long as the FED had an ounce of gold for every $35 redeemed by whomever decided that they wanted to convert dollars into Gold then debt could keep expanding…

In the early 60’s the system began to collapse and the US government/Federal reserve closed the gold window in 1971 when they ran out of gold to back the debt inflation…

The new system, the floating exchange rate debt backed by debt fractional reserve system allowed further expansion of the debt supply by replacing the gold backing of the dollar with the dollar backing of the dollar…Debt backed by debt…

Now on to the maximum potential of the new system…

Since previously created debt is used as a basis for the creation of new debt the following are true logical statements whether you think so or not or can comprehend them or not…

Debt is money…when you borrow money from a financial institution it is created out of thin air with compound interest attached…Currently the reserve requirement for US banks is 3% which means for every $100 a bank has on deposit they can create out of thin air with compound interest attached $3,400 to lend out…The Commercial banks can borrow liquidity from the FEDERAL RESERVE to expand their fractional reserve, so basically the Banks have an unlimited amount of money which is debt created out of thin air with compound interest attached to lend out…

The FED’s estimate of currency in circulation is $700 Billion which is the true fractional reserve and the total debt supply in circulation is $33-$34 Trillion

3% of the money supply of the US is actual currency and 97% is debt created out of thin air with compound interest attached…The evidence for how fractional reserve banking works is right in front of your eyes if you know what to look for…

Current consumer income is composed mostly of previously created debt and future income is composed mostly of new debt creation…

Fractional reserve debt inflation is sustained by creating more new debt than previously created debt… on paper to maintain debt inflation new debt created out of thin air with compound interest attached must at least be equal to the previously created debt created out of thin air with compound interest attached…

But people are the consumers of debt so ultimately there is no way to perfectly run or distribute debt you poke prod and entice consumers to consume and at the end of the day you hope it is enough to maintain debt inflation…

In business operating expenses are composed mostly of previously created debt and profits are composed mostly of newly created debt…

Just in case it was over your head, Debt is created out of thin air with compound interest attached and makes up 97% of the money supply

Cash makes up 3% of the money supply and it’s purchasing power is destroyed by debt inflation…If you save “cash” dollars in a shoebox under your bed in a debt inflationary environment they become worth less over time…

Two factors which cause self sustaining debt inflation…

1. The only way to truly pay or service compound interest which is not created out of thin air but attached to created out of thin air debt is by creating enough new debt out of thin air with compound interest attached to pay or service the compound interest attached on the previously created out of thin air debt with compound interest attached…

2. Debt = money and if it is inflating then the debt/money supply is inflating which leads to price inflation which means that in order to afford to consume a product or service you must continually increase the amount of debt created to account for the rise in price which leads to even greater debt creation the next time and so on…

But is there a maximum potential for debt inflation in a debt backed by debt system…

Yes
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