The point it all changed - when wealth a.ka. money became debt

[Glass]

These are my thoughts after reading a Zero Hedge article today (http://www.zerohedge.com/news/guest-post-explaining-wage-stagnation). I'll post the charts below.

Money has always been comprised of some portion wealth and some portion debt. The ratio of one to the other is really the key IMO. When money was redeemable in "some thing of substance" it had a component of wealth. It doesn't matter what that substance is. The money makers know this. As long as it is redeemable in some thing of substance that is all that matters. When money is irredeemable (by you and me) in something of substance then the money is more debt than wealth.

My own empirical observations looking back on my own life is that things changed substantially around the mid 70's. Living in Australia and it being a bit of a backwater, those changes may have taken a few years to get underway but I can look back and see things that happened with clearly relate to major changes in the monetary system.

For me the key indicators that I recall were the introduction of a credit card system. In the begining we did not have Visa or American Express in Australia. We were fairly isolated in terms of products and so on. They were all local products. Inflation was also very low. Well below 1%. In fact so low that it's likely that inflation was not even measured back then. There was no wealth destruction so there was no need.

We had a credit card system called BankCard.This was the only system of credit cards we had until the early 80's. I had a credit card in the late 80's but I cannot recall what it was. I'm confident it wasn't bank card so it was probably a Visa.

The other thing that I recall changed and this might seem odd, was that up until the mid 70's there was a School based savings program where students could open a bank account with a Passbook. Every 2 weeks a man from the bank, which I think was Commonwealth bank (CBA today) or maybe it was Rural and Industries (Western Australias native bank) which is Bankwest today. This program ended in the mid 70's.....maybe it was closer to 78 -79.

Chart from article

http://azizonomics.files.wordpress.com/2012/07/071812krugman3-blog480.jpeg?w=600

These dates tie in with the abolition of the Brenton Woods agreement. So basically now I have something to backup my claims (to friends and family) that the money system of wealth became a money system of debt around the mid 70's.

While the article talks about wages stagnation I prefer to think of it as wealth stagnation destruction.

Just a few of mine own observations.

Zerohedge article link: http://www.zerohedge.com/news/guest-post-explaining-wage-stagnation

[zap]

Remember when we had lay-a way, I was young and I don't think they had credit cards then, or if they did my parents couldn't get one. AH... do be young and dumb with 2 kids at 19 and 21 , chasing the american dream.

[General of Darkness]

This is just like the conversation I had with a friend last night that wants me to come work for them. It's not in the same way, but perception. He was talking about his "rockstar" account rep that did 5 million last year, he went on and on and I simply asked, what was the profit of that 5 mil?

At the end of the day, everything is about numbers and in a good society they always work, but in a fabricated society they don't. Our society is fabricated on lies and deception.

[Libertytree]

This is just like the conversation I had with a friend last night that wants me to come work for them. It's not in the same way, but perception. He was talking about his "rockstar" account rep that did 5 million last year, he went on and on and I simply asked, what was the profit of that 5 mil?

At the end of the day, everything is about numbers and in a good society they always work, but in a fabricated society they don't. Our society is fabricated on lies and deception.

Amen

[Skirnir_]

It is therefore amusing that those are quick to acknowledge the prevalence of deception and fabrication by others are also quick to forbid its use to counter them. They are merely a means to an end, nothing more, nothing less.

[midnight rambler]

Bretton Woods was definitely a big turning point, but the hard turn toward (what passes for) money being nothing but debt was in the 30s.

[palani]

Bretton Woods was definitely a big turning point, but the hard turn toward (what passes for) money being nothing but debt was in the 30s.
Acceptance of debt in place of real money was voluntary in the '30s and is still voluntary today.

[BrewTech]

Speaking of credit cards, I too remember when their were no (or few) consumer credit cards. There were "charge cards" (e.g. American Express), but they were normally linked to a corporate expense account for business purposes and had to be paid within 30 days.

[iOWNme]

These dates tie in with the abolition of the Brenton Woods agreement. So basically now I have something to backup my claims (to friends and family) that the money system of wealth became a money system of debt around the mid 70's.


You mean its almost like when we completely left the gold standard (1971), the paper got out of control?

Say it aint so!

[Glass]

You mean its almost like when we completely left the gold standard (1971), the paper got out of control?

Say it aint so!

That's right. I'm saying it. I've been saying it to everyone I get a chance to talk about the fraud of credit to. Until now I've only been able to say "from my memory" that period of time was when it seemed to change. Now I can point to Brenton Woods on a nice "easy to grasp" chart that yes, there was a change in mid 70's and it was because, we ditched the last remnants of redeemable money. I was a young child back then so I feel like people think, yeah what would a kid know... when I'm really just fitting the pieces together with hindsight.

Yes charge cards, which are like debit cards today, probably with less fees than today as well. And Lay Away. Down here it's called Lay By. It's still around but I think only with Target and Kmart, Perhaps Big W (woolworths). Tucked away in the corner.

[palani]

When gold was king wars were limited by means.


When means became unlimited then so did wars.

[vacuum]

Good observations in the OP. I think you're definitely putting the puzzle pieces together, but it's not quite there yet in terms of the full explanation. I don't think the "ratio of value to debt" is quite the right concept or the exact effect. It's close, but it seems like there are some fundamental principle(s) that are missing. With money mechanics it's hard not to get distracted by all the details and really understand what's happening. I don't know if it really is that complicated, or if I (we?) just have some kind of blindspot.

[k-os]

I have been wondering for decades why/when society in general seemed to accept the idea of debt (credit) as a reasonable way of purchasing consumer items or services. I think the first program I ever wrote was an amortization schedule (in C++), so I was able to see how much a house ended up costing after 30 years. That started a thought process in me.

I am always asking older people (neighbors, relatives, etc.) why they all agreed to credit cards and loans as a normal way of purchasing things. My dad said he got his first credit card when he found out that he couldn't rent a hotel room with an out of town check. Most other people don't have a clear reason. I got a credit card in my early 20's because everyone told me that I needed to "build credit". That was the mid 90's and not one person I knew, old, young, etc. ever considered the possibility of me saving up the money to pay cash for my modest first house. (I could have.)

Where my confusion remains, and the biggest question I have to these older folks is - when did it become OK to be in debt, to owe, to enjoy something today and pay for it tomorrow? I think there must have been a generation somewhere during the transition that felt it was wrong. Almost everyone insists that it was before their time. Maybe it was. Maybe I haven't talked to anyone old enough yet.

I can look up the reported history of credit cards (invented in 1950's, etc.), but I want to know when the tide changed from cash to credit, and how the idea was sold to the people. When did the greed/convenience/programming/etc. weigh more than the honor of a debt free life?

Sorry for the rant. I freakin' hate credit cards.

[midnight rambler]

I want to know when the tide changed from cash to credit,

After Erie RR v. Tompkins and other events in the '30s which set the stage for the disconnect between value/substance and (what now passes for) money the moneychangers had to come up with a new system. The system remained in a sort of limbo during this 30 year transition with the first phase apparently being Bretton Woods. During the course of the '40s and '50s the Uniform Commercial Code was formulated/'codified' and via the UCC a number of jurisdictions/systems of law were blended together (admiralty, equity, the Negotiable Instruments Act, Law Merchant, etc.). Since there was now a 'colorable' money (i.e. not genuine) there had to be a colorable jurisdiction to go along with it, this new jurisdiction being administrative jurisdiction. By 1966 all '50' states of the union had adopted the UCC within each respective state, e.g. in Texas it's titled the Business and Commerce Code although it's virtually verbatim UCC. All states have the identical code with various differing titles.

Because (what now passes for) money had no substance/value we are unable to 'pay' our debts at law since 'to *pay* a debt' means to extinguish the debt. What goes on now is discharging debt with limited liability (a privilege/benefit granted by the corporate state) since IT IS NOT POSSIBLE TO *PAY* A DEBT WITH A DEBT!

It all stems from the 1913 and 1933 events.

[k-os]

I appreciate your thoughtful response, midnight rambler, but my question is more about why people (not law) changed. Why did people begin to accept the idea of paying for something later, instead of saving up for something they wanted?

[midnight rambler]

I appreciate your thoughtful response, midnight rambler, but my question is more about why people (not law) changed. Why did people begin to accept the idea of paying for something later, instead of saving up for something they wanted?

Herd mentality, the path of least resistance, going with the flow, being 'accepted' by one's peers, etc. Ever heard of Freud's cousin Edward Bernays?

BTW, you DO realize the 'future' of 'money' is using one's 'smart phone' to 'pay for' stuff, right?

[JohnQPublic]

To add another perspective to this, the chart plots "productivity". In corporate America, an increase in productivity usually means you layed people off. The people that are left continue to do the job they did, plus the work of those laid off; therefor they are more productive. Of course at some point someone realizes that the work is not getting done right, the wheels are coming off the buses, etc., and then they have to hire a few more people.

When Obama claims we are the most productive people in the world, what it means is

1. We work hard (not necessarily harder than the rest of the world)
2. We have racked up huge GDPs through financial fraud (derivatives, etc.)
3. When you take the world's GDP's and divide them by the number of workers, our fraudulent number looks bigger than their fraudulent number.

therefor, we are the [fraudulently] most productive workers in the world.

[k-os]

Herd mentality, the path of least resistance, going with the flow, being 'accepted' by one's peers, etc. Ever heard of Freud's cousin Edward Bernays?

BTW, you DO realize the 'future' of 'money' is using your 'smart phone' to 'pay for' stuff, right?

Well, I have a dumb phone, but yes, I am aware that is one of the steps in the digitization ladder.

I just looked up Edward Bernays, and he seems like a DB that started a whole trend that has continued today of generating news as a means of advertisement.

[Sparky]

To K's point, my parents bought their last house in 1966. As a kid I remember my dad telling me that of the 20 houses on our street, ours was one of only two that never held a mortgage, which he was proud of because he grew up poor and worked in a factory for many years. Of course, my dad also started pulling silver coins from his pocket change in the '60s and '70s because he was certain that some day it would be worth much more than face value.

One other related side note: society's attitude toward a lot of things changed between the Summer of Love (1967) and Nixon's resignation over Watergate (1974). Those were two critical turning points points in our history. In 1967 people began to reject the "establishment" as self-serving. In 1974, they began to reject it as corrupt. Watergate introduced into our society a national cynicism that exists to this day. A lot of the good-ol'-boy bullshit that goes on was first outed during that 1967-74 time frame. Much of it was related to the exposure of the Viet Nam War. It was the first U.S. war to be televised. But I digress...

[midnight rambler]

Well, I have a dumb phone, but yes, I am aware that is one of the steps in the digitization ladder.

I just looked up Edward Bernays, and he seems like a DB that started a whole trend that has continued today of generating news as a means of advertisement.

Bernays was instrumental in women 'liberating' themselves with cigarette smoking.

And regarding your query, 'Buy now, pay later' has a nice ring to it, huh?

[midnight rambler]

I have a dumb phone

I edited my post, I didn't mean YOU directly.

FWIW, my phone is an antique, it's seven years old.

[k-os]

Bernays was instrumental in women 'liberating' themselves with cigarette smoking.

Yeah, I read that part too, and the result sucks, but the methods by which he accomplished that are still being utilized today . . . and have been used in the media in all days in between. Ugh.


And regarding your query, 'Buy now, pay later' has a nice ring to it, huh?

Not to me, but I think too much. It seems familiar, if anything, probably because I've heard it a million times.

[BabushkaLady]

. . . but I want to know when the tide changed from cash to credit, and how the idea was sold to the people. When did the greed/convenience/programming/etc. weigh more than the honor of a debt free life?


I'm pretty sure it was the '60's . . . If it feels good do it.

It was a period of time when people took a holiday from responsibility and (for the most part) we haven't returned to it.

[Glass]

I think k-os asks (aks) an interesting question. It is a big shift in mentality and it seems like it happened fairly quickly AND the main thing is that not only did people (appear to) willingly accept this new paradigm of debt money BUT they have completely forgotten how it used to be before and I find that amazing and disturbing. How people could have no memory of how it used to be. I prod people, not by telling them something but by asking them something that hopefully triggers a memory and they go, oh yeah....... Now I remember!

I personally think it's this constant push to move on to some new issue. We never get to address the current issue, problem, scam, crime what ever it is they are implementing. It's all about moving on, whats the next big drama we can all carry on about. Then it's on to the next one. We soon find ourselves so far away from the zero point we have no chance of getting back there to address the original issue, which of course if we did, would solve all of the other issues.

It's like, if a baby is screaming and bawling it's head off, what do the parent do? Assuming the kids not dying, they try and distract it, take it's mind of what ever the grizzling was about and give it something else to occupy it's mind with. People are governed in much the same way even though they are supposed to be grown-ups.

The speed with which the old was forgotten is troubling IMO.

[Sparky]

...
I personally think it's this constant push to move on to some new issue. We never get to address the current issue, problem, scam, crime what ever it is they are implementing. It's all about moving on, whats the next big drama we can all carry on about. Then it's on to the next one.
...

Too true, Glass.

[Hypertiger]

Commercial banking as you see it today began 600 years ago.

Money has been debt for centuries...the entire history of the the USA and world was financed by created out of thin air debt.