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  • Frankly speaking, I've always been scared of economics - as the subject was always boring and filled with complicated terms. However, I've been trying to figure out the basics of how money works and my investigation led me to finding out why money is always associated with debt. To summarize, the central banks of the worlds - are the ones who are responsible for the debt all nations have.

    Think about it from the basics. If every nation prints their own money - there would be no reason for any country to be in debt! Now, that's simplest way of saying the 'complicated' things in economics. The 'Central Banks' of the world, which are controlled by the big corporations are actually the creditors of the world. They are responsible for the money supply to nations, banks and every other institutions. Then who supplies money to the Central Banks? Well,they simply print their own money!

    Think about it and let me know your thoughts.
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  • Kaustubh Katdare

    Administrator • Jul 24, 2011

    ... and we complain about why there are no 'brainy' discussions on CE. The thing is, no one wants to participate in discussions that require extended use of brain. Huh?
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  • silverscorpion

    Member • Jul 24, 2011

    #-Link-Snipped-#

    I believe there was already some question similar to this and someone mentioned this link too.. I think the same question was asked for IMF.

    Basically, the primary way I think it works is by <a href="https://en.wikipedia.org/wiki/Hedge_%28finance%29" target="_blank" rel="nofollow noopener noreferrer">Hedge %28Finance%29</a> one debt with another.. So, it must have started with some initial principal to start with. That initial amount could've come in many ways. When such an institute was started, all the member nations could've contributed something to create a working pool of money to lend from. Another way is, the bank may collect some membership fee from its members.. Although it's not much, it's something.. And another important source is the interest from outstanding loans..

    Also, as it's mentioned in the website, the loans which are handed out can be made into bonds or debt certificates and those can be used to raise further capital. In fact, this is the basis of investment banking..
    I think this is how the central money lending institutions manage to function..
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  • silverscorpion

    Member • Jul 24, 2011

    The_Big_K
    If every nation prints their own money - there would be no reason for any country to be in debt!
    Absolutely!! But, a nation simply cannot do that, unless it wants to remove itself from the global economy and become a closed shell.

    For a nation to print currency and let it in circulation, it must have the corresponding amount of wealth. Simply put, if a nation prints new currency worth X, then it must add gold or Forex or some other form of wealth, equal to the same amount X, for maintaining the balance of economy in the country. If not, it'll be disastrous.. If a country simply prints as much currency as it needs and lets it in circulation, the first thing to happen will be, the international value of the currency will come down. Inside the nation, inflation will sky rocket.

    The best example for this situation is Zimbabwe. There are currency notes of denomination, believe me, 100 billion Zimbabwean dollars.

    735px-Zimbabwe_Hyperinflation_2008_notes

    If you Google the exchange rates of 1 USD against 1 Zimbabwean dollar, you'll understand.
    So, unless a nation wants to isolate itself, it can't print currency without having necessary value to sustain it.

    You can go through these links to get an idea of how money works, in general..

    <a href="https://en.wikipedia.org/wiki/Gold_standard" target="_blank" rel="nofollow noopener noreferrer">Gold Standard</a>
    <a href="https://en.wikipedia.org/wiki/Bretton_Woods_system" target="_blank" rel="nofollow noopener noreferrer">Bretton Woods System</a>
    <a href="https://en.wikipedia.org/wiki/Gold_reserve" target="_blank" rel="nofollow noopener noreferrer">Gold Reserve</a>
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  • Kaustubh Katdare

    Administrator • Jul 25, 2011

    @Silver: I agree with the points you've mentioned. But I think any country can do fine in the Global economy while being debt free. See, when the FED lends money to the banks, it doesn't do it for free. To be clear - the existence of the FED is NOT required. When they lend money, they sign bonds (which is nothing but a piece of paper). This means, every dollar printed has debt associated with it! If FED directs the US Bureau of Engraving and Printing to print money which it then gives to the US - with debt attached! It's important to note that the FED is backed by major US corporations which are purely profits driven!

    Since every dollar has debt associated with it, lending it to other nation generates more debt. Guess what? There's no more money to take care of the debt. The system is cyclic and keeps on generating debt!

    ...and FED exactly wants this to keep happening so that they remain in control of the world economy.

    SUCKS! 😡
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