Well, for starters there's the reason WHY the stock markets (globally) are crashing. The banks aren't lending as much as they used to.

Every time a loan is made, "money is created" BUT the interest on that loan is NOT created -- so money already in the system has to be sucked out to pay back the loan. How do we avoid running out of money in the system then? Well, we have to have CONSTANT GROWTH so all the interest on previous loans can be paid back, and still have enough money in the economy for things to run smoothly.

People have to keep borrowing -- to put enough money in the economy to pay for last years' interest. Eventually, that becomes impossible for various reasons.

Since this world is finite (it has limits), you can't have infinite growth. That's common sense. It has to end sometime.

Another thing to keep in mind -- if you had 5% growth per year, what would that look like? Well I'll give you a hint: if you compound it every year, eventually it would be ridiculous.

Say I got you to agree to pay me 2 cents a day, but you had to increase the amount by a mere 5% every day.  Eventually you'd have to pay me millions of dollars -- and sooner than you might think. Compounding is a very powerful process.

Same with our economy. Eventually, to get that target of "5% a year growth" we would need millions more barrels of oil per year, millions more consumers, and hundreds of thousands more acres of land. Obviously, you run up against REALITY and physical limits.

All this wouldn't be necessary if we didn't have a debt-based money system.

Here is a very informative video for beginners who want to understand our money system. A child could understand it -- I really like this video!



Matthew

Well, when businesses can't borrow any more money (you'd be surprised how many businesses operate on debt for their daily operations), they have to lay people off, etc.

Once layoffs begin, a vicious cycle starts. Less people have money to spend, which means they spend less at the store, which means those stores have to lay off people, etc.

It all starts with "fewer loans being given" -- remember, in our economy all money = debt. ALL money (without exception) comes into being with an act of someone going in debt.

Right now, the housing market is crashing, which caused great trouble for the banks who held those loans.

The economy is a huge, complex monster, with plenty of factors involved. Many phenomena feed on each other, such as foreclosures bringing down property values, which reduce tax revenue, which cause layoffs, etc.

We're on a downward spiral right now, and where it stops nobody knows.

When there are fewer people with money, there is less money being spent. That means there is less demand for work (jobs) which means your husband will have to out-compete a bunch of other guys to keep his job.


Matthew

Yes, there's the down-to-earth reality that everyone can understand -- money is a medium of exchange for goods and services -- but that is a better description of gold and silver coins than the money system we have today.

Today all money starts out as debt, and they don't make enough of it to cover the interest on the loans they give out. So the economy has to keep "growing" ad infinitum -- which isn't possible, so you have depressions, etc. which reset the cycle.

Yes, if we could all get rid of the Federal Reserve and start trading silver & gold coins among ourselves, we'd be all set. You'd work, I'd work, some people would produce food, etc. and as long as you were willing to work, you'd probably be able to support your family.

But nowadays, the men who run the money supply can reduce the supply of money at will, and make the economy "contract" which makes people unable to find work, earn money, etc. because money becomes so scarce. It's very messed-up, I agree.

And yes, businesses often have the equivalent of a mortgage. It's debt, but "everyone does it" and as long as they can make their payments on time, they don't worry about it.
Myself, I resort to debt only when absolutely necessary.

Matthew

John can no longer retire at 65. He'll have to wait until he's 75 or 80 -- until then, he'll have to work at Wal-mart.

And, of course, when John can't retire he's one more person your husband would have to compete with for a job. When thousands of people can't retire as planned, there's that much more competition in the workforce.

To his way of thinking, the fact that people work "creates" money - to be honest I don't quite understand what he meant,

The idea of work "creating" money is not really accurate at all.

An example--one man can work a lot and another very little and the second man come out with more money. Clearly, it wasn't the work that generated the money, but rather the worth of what was created.

Another factor is the presence of someone with money willing to pay you for your work. Today's example would be the home builder. It takes a lot of work and is quite the skill to build a nice home, but if fewer and fewer people have money to buy a home, the home builder still makes no money. It's not that they don't want a nice home, just that they too have no money to pay him for his work. So, he can work all he wants and still have little or no money.

but then again I don't understand how businesses (and thus, their employees) are so dependent on the banking system.

I think this would be more accurate the other way around. It's banks that are dependent on the business world. If no one borrowed money, how would a bank survive? Well, it would survive as the do provide the service of housing/safekeeping the wealth of business/individuals, but they couldn't make a ton of money which is what they desire. To make lots of money, they have to loan our the money they're keeping and charge interest. It's not too difficult to persude someone to borrow you money as human nature is inclined to greed even if that someone didn't really NEED the money.

Next, they've convinced everyone to borrow money, but they don't have enough in the bank to keep lending. And, when you can't lend, you can't make money. So, they start lending money they DON'T have so that they're profits can be that much larger.

Now, say you're the small business who just wants to operate your one little store which you've owned for decades and you have no reason to borrow from the bank because you're making enough money to feed your family and you're not as greedy as the rest. Unfortunately, if you don't get with the game, borrow from the bank, open more stores, and become an increasingly larger operation, you won't be able to compete and will eventually be put out of business by the guys who are that greedy. So, now they banks have made it possible for the businesses to be dependent on THEM rather than the other way around.