7 ms·

What does "debt-based" have to do with extracting money?

yuhong 8y ago
The current economy allow creation of an almost infinite amount of debt and has since at least 1971 I think. It should be obvious how such an economy incentivize extraction, one of the most obvious being credit cards.
walrus01 8y ago
https://www.cnbc.com/2018/05/21/consumer-debt-is-set-to-reach-4-trillion-by-the-end-of-2018.html https://www.cnbc.com/2018/05/21/consumer-debt-is-set-to-reac... https://www.creditkarma.com/studies/i/average-debt-american-household-on-rise/ https://www.creditkarma.com/studies/i/average-debt-american-...
hammock 8y ago
When money is easy, the incentives switch to increasing consumption, rather than investment in increasing productivity. Why spend time and money inventing a better mousetrap when you could just buy ten more of them? The principle applies at every level of the economy (individual, corporate, government etc)
- yuhong 8y ago
  And thinking about it, when something like the ad bubble drive up housing prices for example, other companies may have to participate too in order to pay competitive salaries.
- Nasrudith 8y ago
  I don't quite see how that follows necessarily - high investment allows for maximizing per unit costs compared to "paycheck to paycheck". Not that consumer debt bubbles aren't a thing.
  - yuhong 8y ago
    In this case, we have been running a trade deficit since the 1970s.
    - Nasrudith 8y ago
      It is a world reserve currency as well making a deficit pretty much inevitable as long as it holds. Getting goods in exchange for spreading your currency's reach sounds like a pretty good deal to me. Effectively it gives a "virtual economy size" from worldwide dollar users over just producing for the local economy - not doing so in response would be deflationary. They need some sort of goods or services in exchange so the economic backing is provided for any outflowing currency.
      - yuhong 8y ago
        The point is that it destroys local manufacturing though, leading to more and more goods being imported.

The current economy allow creation of an almost infinite amount of debt and has since at least 1971 I think. It should be obvious how such an economy incentivize extraction, one of the most obvious being credit cards.

walrus01 8y ago

https://www.cnbc.com/2018/05/21/consumer-debt-is-set-to-reach-4-trillion-by-the-end-of-2018.html https://www.cnbc.com/2018/05/21/consumer-debt-is-set-to-reac... https://www.creditkarma.com/studies/i/average-debt-american-household-on-rise/ https://www.creditkarma.com/studies/i/average-debt-american-...

hammock 8y ago

When money is easy, the incentives switch to increasing consumption, rather than investment in increasing productivity. Why spend time and money inventing a better mousetrap when you could just buy ten more of them? The principle applies at every level of the economy (individual, corporate, government etc)

yuhong 8y ago
And thinking about it, when something like the ad bubble drive up housing prices for example, other companies may have to participate too in order to pay competitive salaries.
Nasrudith 8y ago
I don't quite see how that follows necessarily - high investment allows for maximizing per unit costs compared to "paycheck to paycheck". Not that consumer debt bubbles aren't a thing.
- yuhong 8y ago
  In this case, we have been running a trade deficit since the 1970s.
  - Nasrudith 8y ago
    It is a world reserve currency as well making a deficit pretty much inevitable as long as it holds. Getting goods in exchange for spreading your currency's reach sounds like a pretty good deal to me. Effectively it gives a "virtual economy size" from worldwide dollar users over just producing for the local economy - not doing so in response would be deflationary. They need some sort of goods or services in exchange so the economic backing is provided for any outflowing currency.
    - yuhong 8y ago
      The point is that it destroys local manufacturing though, leading to more and more goods being imported.