Can someone please explain something for me?
The present credit crunch is global, and each country is trying to find a way out of the mess. It is said that the UK's PM, Gordon Brown, has suggested a method by which the taxpayer bails out the banks in the hope that they in turn will help improve the economic climate.
There are bilions of £ of taxpayers money going into the bail out however, if I remember rightly, to pay for the UK's ordinary benefit/social needs and general governing of basic societal needs, the UK has been borrowing billions from others, and the GDP has been rising year upon year for some time. This borrowing is no where near the amount being paid to the banks, so where is this money coming from? How is it that there is money paid by the tax payer for to bail out banks to the tune of exhorbitant amounts when the government had to borrow just to keep the country afloat and functioning?
Something is wrong here! Can anyone explain?
I would add that we are also supposed to be using the taxpayer to help fund the 2012 Olympics in London. Where is the money for that? Are we all going to have to have an even lower standard of living just to pay to keep these greedy bankers/city high flyers/politicians in the money?
Beats me!
Apparently, nowhere in the world has it occurred to them —politicians—to cut their monthly salary or the Xmas benefit to fix this mess.
And to add more insult, some politicians don't seem to care about the problematic times we're living in. You think the UK has a bad government? Take a look at this news from Mexico!
How about that?? That witch wants more money for her Union, but is still spending the taxpayers' money on luxury vehicles as gifts for her supporters.
How many teacher do you know that drive a Humvee?? Meanwhile we have kids who have to sit on the floor because their schools can't afford to buy desks.
Oh! and she even had the nerve to state that she would have given them 'bullet-proof' Hummers if she could have. After the scandal broke last Monday, she retracted and changed her words, saying now that the Hummers will be put on a sweepstake, and the money gathered would be used to build 10 new schools. Yeah, right!
Don't be complaining about your government too much, dear Carol. Always remember that there's someone out there with an EVEN WORSE one! ;-)
-----
It's not the depth of the rabbit hole that bugs me...
It's all the rabbit SH*T you stumble over on your way down!!!
Red Pill Junkie
You are right RPJ
You are right RPJ, I do complain a lot about my government, and I do realise that there are other countries, and other people, worse off than me, but it doesn't make it any easier to live with.
So many people seem unable to accept that a once great country like Great Britain has lost not only its reputation but also its identity throughout my lifetime.
When you find the only country you can belong to is the one in which you were born, and that you don't have any right to citizenship of the country of one of your parents, it does make a difference in your perspective.
Now as I see the only country in which I am allowed to automatically have as my nationality, not dual nationality as I had been led to believe for so many years, become a different entity to that of which I was raised I am finding it hard to adjust.
I never said I could adapt to all things, and this is still one of the things I am trying hard to place in a harmonious understanding within my psyche. But it is still tough.
I sometimes despair that the so-called leaders of our countries are so ignorant! But then I realise that when I was younger I thought I knew it all, and was just as clever, but it is only as I have aged that I have realised how false a belief this was.
Now I have to accept that some other people, who should have matured by now, are still thinking like young ignoramouses, despite their age and length of time in positions of authority and leadership.
Oh well, we all have to wait for others to catch up I suppose.
Thanks for the reminder. I do need to be told sometimes, no-one is perfect, certainly not me!!!
Carol A Noble
other countries
The money comes from selling government bonds, as is normally done when the government borrows money. Countries sell bonds even when there is a budget surplus.
Who buys these bonds? The common assumption is that it is China and the oil countries. Also of course individuals and companies buy these things. Long term bonds can be a very nice investment - you can collect interest for 30 years, and if you are lucky you get your principal back at the end. Or you sell them sometime during the 30 years, then you don't care if they are paid back. A little more complicated in practice, but basically that's it. The interest over a few decades dwarfs the principal.
Why would China and the oil countries buy these things in large quantity now? Simple - they need to keep their customers alive and buying. They have more to lose than the US and Europe (yes, the UK is part of Europe :)
----
It is not how fast you go
it is when you get there.
Governments Can Print Money!
Carol,
Since the Pound is based on the integrity of the British Government, not a commodity. They can simply print the extra money that they need.
What do you think?
cnnek
{You Can Teach People How To Think Or What To Think; But, You Can't Do Both! It Is Better To Teach People How To Think!!!}
printing? ha!
I know "printing money" is used metaphorically these days. It is not worth it, really. We adjust some numbers in some computers, it is much cheaper.
I head the other day that Australian banknotes are actually made in Canada. Don't those people have any self respect? :)
----
It is not how fast you go
it is when you get there.
Thin Air
cnnek is right. This is the basis of all fiat currencies, in such that more currency can be created out of thin air. This, of course, leads to more currency in the system chasing the same amount of hard assets and goods, which leads to price inflation. The resonant feedback harmonic that can be created as things become more expensive causing governments to print more money has has been the cause of economic COLLAPSE for EVERY ECONOMY in the HISTORY OF THE WORLD that has tried to INFLATE THEIR WAY OUT OF DEBT.
Can you say "Weimar Republic" anyone?
God Help Us All,
AncientSkyman
non-fiat challenge
How about a small challenge - how do you make a currency that is not a fiat currency?
Gold based currency are just as "fiat" as what we have now. So are most other commodity based currencies.
Everything is based on the assumption that other people will work for you. When people don't believe that any longer, the system collapses.
Even if the other people still want to cooperate, if the trust goes away, so does the cooperation.
So, what alternatives are there?
----
It is not how fast you go
it is when you get there.
Gold is Not Fiat
Any currency backed by a physical comodity is a non-fiat currency by default. Fiat means that there is nothing behind the currency. In a gold backed currency, it means for every unit of currency set loose in the market, there is a corresponding unit of gold in governmental control. At any time a citizen can come in to a bank or government institution and exchange the unit of currency for the unit of gold.
A fiat based currency has nothing behind it at all. All the currency becomes is a 'Promise to Pay'. That's it, just a promise, mandated by the government. But this is why the Founding Fathers of the USA created Article 1 Section 10 of the US Constitution :
No State shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts; pass any Bill of Attainder, ex post facto Law, or Law impairing the Obligation of Contracts, or grant any Title of Nobility.
Wikipedia has a good article that you can read here: Fiat Currency
Hope this helps.
ASM
let me explain
let me explain why gold is fiat, for practical purposes.
Suppose a central bank, or even some private person, gives you gold for your paper money. Or for your numbers in the computers at your bank.
What do you do with the gold?
If you are a goldsmith, or you can make gold teeth, or some such trade, then yes you can use it.
Otherwise you are left with trading the gold for something else. Food, transportation, some service. It is the same as paper money, or numbers in bank computers. Fiat money.
Even if you can make gold teeth - you need someone who has bad teeth, and you need them to do something for you.
"By Default" is not a valid point here, unless you can actually do something with the commodity. Do something yourself, that is. Using it as another currency does not help.
----
It is not how fast you go
it is when you get there.
Alchemist
The main difference, which I didn't see you mention, is that you can make more paper money out of thin air. You cannot create more gold (unless you are the Master Alchemist). To have more currency in circulation with a gold backed currency, you must acquire the physical gold to back each unit of currency issued.
I think you are referring to the difference between currency based systems (money) and barter. That everyone agrees Gold is a currency just makes it currency, and not fiat.
What is Money?
Yes, everyone needs to agree to accept gold as money, but that is the point of money, to separate the actual physical goods and services from the unit of exchange. All currencies have the same function, be they fiat or not. Gold, being of finite supply, means that a government cannot just create more of it out of thin air; therefore it constrains the government’s ability to create liquidity without backing. This is exactly why the Founding Fathers of the USA put Article 1, Section 10 into the constitution. Inflating a currency by removing its physical underpinnings goes back to the Greeks and Romans, and most likely even further back than that. The results, predictably, are always the same. . . economic collapse.
Peace,
AncientSkyman
All weath is arbitrary and ficticious
I think in these past weeks we have come to learn that all material wealth is part of a subjective system.
Even gold being treated as a valuable commodity is arbitrary. What's so special about gold, apart from the fact that it's scarce?
And that's the crux of the matter, we need a symbol that represents that wealth is finite, and that it can only divided in limited ways, in order to maintain a pyramidal structure of society.
There might come a day when scientists discover that dog poo is the missing ingredient to fusion energy; and when that moment comes—mark my words— only a few fortunate will be allowed to own a dog. The rest will have to settle with a black market of cats and pretend their tabby can fetch a ball ;-)
-----
It's not the depth of the rabbit hole that bugs me...
It's all the rabbit SH*T you stumble over on your way down!!!
Red Pill Junkie
Revolutionary Wealth
RPJ makes a good point, money and wealth as means of control. But aside from control, money over barter is just a plain old good idea. How it is put into practice becomes the sticky point.
Revolutionary Wealth
The above link goes to a wiki article about a book I recently read that seems to go to the heart of what you are saying. Check it out. Alvin Toffler, the author, also wrote Future Shock in the 1970's, and that proved to be quite accurate.
ASM
fiat
Yes I am saying that any currency is useless unless society agrees that it is a trusted contract for future goods and services. Whether or not it can be made up physically is of no consequence.
Commodity money, such as gold, is just as useless as what we call paper money. What should I give you for 1 kilogram of gold?
The contract is everything, the physical currency is nothing. That is my point.
The current problem started, basically, because some currency is backed by real estate in the US. Private housing mostly. All those houses are still there, on the same land, in some wonderful locations. No government made this up, it is physically there. The only problem is that some bankers don't believe it is worth as much as previously agreed on.
----
It is not how fast you go
it is when you get there.
OMG!
It's almost as if there was a brief red pill addiction on Wall Street! ;-)
Don't worry, those spineless pricks will beg to get jacked into the Matrix again. After all, a virtual steak tastes as good as a real one, as long as your brain keeps telling you so :0)
-----
It's not the depth of the rabbit hole that bugs me...
It's all the rabbit SH*T you stumble over on your way down!!!
Red Pill Junkie
right
Remember when Greenspan complained about the "irrational exuberance" in the stock markets some years ago? The only reason the markets didn't collapse was that those young investment bankers could not spell "exuberance", and thus could not look up what that means.
This goes back to our discussions about education, or the lack of it, in the younger people.
----
It is not how fast you go
it is when you get there.