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Virtual money versus real money
by Martin ·
Always existed a correlation between the circulating money and real wealth, which is half the gold standard. When it broke allowed to enter the speculative field with its own money, very dangerous ground, because if in 1929, stock market speculation, which ended up sinking the financial system in 2010 is the speculation on own money. It began to create virtual money from the debt issue. In the case of the states was debt that had to be purchased by states or financial institutions. The state got real money in exchange for issuing debt to be purchased by another.
With respect to private debt has been the same, mainly based on land speculation, people buying virtual real estate prices, borrowing under the premise that it could pay its share for 25 or 30 years because it would collect the same salary or more for all that period. That assumption was based on the confidence that there would be full employment for 30 years, which in turn had been achieved in a fictitious, under the influence of overconsumption and hiperendeudamiento to consume.
Finally, there is a vicious cycle that feeds itself, where there is only one real number “X” real money in circulation and a number “and” far more virtual money is actually debt. No money, just money illusion. At some point this vicious circle had to be changed because it was unsustainable as debt eventually reached begins to increase while not being able to pay, then the cycle begins to turn upside down. No debt is paid, banks have no real money (virtual money continue to have much because they are creditors in debt), banks stop lending money, people stop buying property and consuming (as it was based on debt and the bank no longer allowed to borrow more), companies have a surplus production that can not be sold, banks will not lend to these companies, businesses closed, resulting in unemployment, the unemployed do not eat, GDP decreases, the state needs issue more debt, no one wants to buy, and the market applies a higher rate of interest. The country can not pay this debt because its GDP is not growing. All countries are in debt.
Conclusion: states and banks bankrupt. Why? Because the debt is unsustainable, there is little real money and virtual long as debt, but that money does not exist, exists when the debt gets paid after year. This virtual money in the form of debt is like money burning hands, the less time you have it in your power better, the important thing is to circulate and not have you, to be driven without stopping from hand to hand. The party is over when you say, I do not want this virtual money as debt, because I have not clear that they can afford. Then, when everything stops turning, the important thing is who has the real money because everything else will pay debt.
It’s like the game of the seat, one that at a time for music and is one less chair as someone can not sit. In this case, it is as if I had 5 people and 5000 people turning to the beat of the music. When the music stops, only five can sit and these five are the ones who knew what the game would have been closer to the chairs while the other spun happily around 4995, hoping that everyone would be able to sit down. The chairs represent real money.
I do not know if I’ve managed to express my idea, but what I meant was that the bankruptcy of banks and states seems inevitable, the question is: When will it produce? And most importantly: What are the implications for the whole of society?
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- A toxic substance called money
- Such as printing money affects currencies, Part 2
- Virtual World Conference 2010
- Such as printing money affect currencies
- The best “democracy” that the money could buy
Tags: crisis, Economy, exchange, money, private debt, real estate, real money
