Quote:
Originally Posted by renormalised
the actual debts are illusions.
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No Carl, that's the whole point, the debt is the REAL portion and the perceived increase in value of the currency/commodity is non-real portion (ie housing bubble, stock-market/DotCom bubble, and now the Hollywood bubble).
In this way, the property market may well collapse, but my obligation to the bank, ie my mortgage, will remain...debt is more real than fiat money ever will be.
They unhitched the 'Gold Standard' back in 1932? to allow for an expansion in the monetary base which was said to benefit commercial trade. This was part truth and part lie. Another bad move was the adoption of the 'Fractional Reserve Lending' policies which allowed banks to lend 9 times their cash reserves...this literally created debt out of thin-air (and interest returns too). Banks used crazy ploys to leverage up to 45:1 and that's why they eventually collapse.
This is why gold is a hedge against inflation. It's not that the value of gold changes, it's been stable for thousands of years; gold prices fluctuate because fiat currencies float around...this creates the illusion that gold changes in value...it doesn't...the cost simply varies with the day and currency type.
Over the past 40 years, the amount of gold brought into circulation has increased only by 50% (114k to 170k tonnes), whereas the increase in the international trade currency (USD) has increased by at least 900% ($125 to $1000+ Billion dollars). This is why you hear things like "the [US] dollar's only worth 9 cents for the original dollar"...that's inflation at it's finest, and the reason why it costs so much to fill-up your car's petrol tank as the years progress.
"Pay-Day", is when the bank/s finally collapse through massive and poor lending, to which the government bails-out the banks and the tax-payer/commercial sector pay for it because governments don't actually create wealth; they distribute it.