Kasz216 said:
I don't agree with any of those. Except... tentativly the first one. I'm guessing you think the money created in QE1 and QE2 was supplied as repos. However that's not the case. QE1 and QE2 money was aquired by purchasing Treasury Bills... which they will probably never actually cash. So essentially, the government buying government debt. The Federal Reserve issues stock, however is not actually owned by any of the banks... the stock actually more of a "requirement for entrance" into the government system... essentially taking on the cost of oppuration. Outside that... excess money is often put into an account to protect agaisnt failed Repos... which i'd think would be a good thing? When this fund is considered more then big enough to cover loses the excess is transfered to US Treasuary who uses that money to pay off US Debt. Or it's used to buy T-bills directly. As seen with the above QE 1 & QE2. That's the whole point of loans. You want money now, so you agree to pay more to a bank to get a loan. I mean, the world coudn't function in a zero interest loan enviroment. The problem has nothing to do with the banks, and everything to do with the fact that those taking the loans aren't increasing their own wealth or income in the same way. Additionally most of this profit gets paid out of the sysetm to those who hold stock in banks. Which could be up to 53% of the population, who then spend or invest it in other areas. Well outside those who put it right back in the bank, but those are more likely then not the poorer share holders.
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The problem is that this system increases the money supply, not based on actual goods and services available in the economy, but on other factors. And when you have things like they are now, where assets were overvalued, and paid for with debt, you can't service the debt. Critics of monetary systems based around fractional reserve banking point this out:
http://en.wikipedia.org/wiki/Criticism_of_fractional-reserve_banking
The short here is that there isn't enough money in existence to service the current debt. You see this now, because how is Europe considering addressing its debt crisis? It is looking to issue Euro bonds.
As far as "the government buying debt from itself", this is false, because the Federal Reserve is not part of the government. There is government oversight but it is a private bank. If they government did buy debt from itself, why would it charge itself interest?
The end result here, on how the system is set up, right down to the issuing of currency, is that any disruption and slowdown in growth causes it to collapse. It is not sustainable, and that isn't a win-lose. It ends up being a win-lose-lose-lose-lose.
As far as the world not functioning a 0% interest based economy, if you didn't have one that was based on debt, it could. But, so long as you keep operating a system around the need for more money in the future, particularly in how currency is produced, it eventually does collapse. A debt based system will always produce a certain percentages of insolvency, no matter what people try to do, and if they did everything right. Only sustainable system is one pegged to the current amount of goods and services in the economy. But the current system has money supply not pegged to goods and services, but to projections of possible goods and services, all linked to interest that requires even more economic growth to sustain itself.
The one question that would remain here is: How the heck do you finance any projects getting done, if it isn't debt based? How about using one based on future returns on assets? You know, like they have with stock markets?
