The Stock Market is 200% (debt exceeds cash) margin cash. It will drop like a stone if that's all called in whilst "cash-on-the-side/cash-busy-elsewhere" doesn't pay it off with enthusiasm.

I've collected all the relevant figures I could find on money in the stock market, and put them in a txt file, and put that on the front page of my unused website:

Oh and something like 10 times the base money supply.

Actually most money that is lent out never existed in the first place. It's called fractional reserve banking. it's made up out of thin air.

Hahaha. I know all of that, that's why I also gave you the base money supply ratio to US debt. Actually fractional reserve lending is itself an oversimplification because commercial banks are no longer constrained to any specific ratio to reserves in writing their IOUs (9:1 is often mentioned). I believe banks have had free reign since the 1970s, but many textbooks on the matter have alas lagged behind on the subject. There's a couple of very good ones written by a Dr Josh Ryan-Collins, but unfortunately they're UK-centric (not that the US is meaningfully dissimilar from the UK). I call conventional money "mortgage-money" because the vast majority of it was brought into existence through a mortgage broker. Have a look at the numbers on my website: http://www.rayner-hilles.com

Without fractional reserve lending we would have little growth. If someone puts down an adequate down payment on a house, business or income producing asset the bank has an adequate cushion in case of default. Problems occur obviously by shoddy lending practices.

So as of now US debt going by the treasury figures is 5.3 times the base currency supply. That's because of QE, the fed holding half of base currency internally. In terms of cash and coins in circulation however, it is indeed something like 10 times the permanent money supply.


I agree with you the ever growing mortgage-money does drive growth because human nature is such that it needs to see numbers constantly go up in order to maintain confidence. The real problem Mr Hmk though, is that the money to pay the interest is never created. This combined with what you might call "perpetual usury," that is relending money attained through interest payments instead of spending it into the real economy, can have inevitably devastating results. No matter how seemingly careful you are about who you lend the money to, so long as you keep lending it, global-default is a mathematical inevitability.


There will always be a probability for default no matter what. Adequate reserves will protect the lender from losses. In the event of widespread default/ and bank runs the Fed is supposed to come in and lend the banks cash in exchange for assets the bank posseses.

Now you're starting to sound like Ray Dalio. Yes it all sounds nice in theory that the fed will save us with perfect counterbalancing asset purchases. Let's hope you're right, or the future isn't looking all too bright.

And probability is still far removed from certainty. Perpetual usury in fractional reserve lending leads to global-default, just as a blood clot leads to cardiac arrest. If there isn't 100% circulation, then we will die. No ifs or buts.

That was the original intent of the FED the addional mandates have resulted in completely FUBBing the economy. If they stuck to their original mandate I think a lot of the excesses in the economy wouldn't be there. Also allowing and mandating failure for poor lending should be enforced.

The problem is every time there's been a crash the FED has had to go against these original principals in order to keep the economy going. It's much like how an alcoholic must not suddenly stop drinking or he will die, yet he must quit drinking in the long run or he will die too.

BTW isn't the idea of perpetual lending being prohibited one the islamic tenets?

Usury in money is prohibited full stop, leave alone doing it again and again until there's not enough money in circulation to keep up even the interest payments.

Actually the Church prohibited it 1000 years ago as well because it says in the old testament not to commit usury against your brother. Ironically, they got around this by letting the jews lend out money on the behalf of the sovereigns, because Jews were not the brothers of Christians, despite them both trying to adhere to exactly the same Abrahamic law. This is where historic anti-semitism comes from: bad PR for a race to be the money lenders.

The current definition of usury is lending money at abnormally high rates. So was usury prohibited or all lending?

Just the lending of money, funnily enough. I think of usury as parasitic rent seeking, i.e. earning income for literally doing nothing (which is not the same as profit-seeking). Prohibiting parasitism is half the spirit of prohibition of usury, the other half is the callous indifference that's implied by charging interest against your brother and neighbour.

Note I say brother and neighbour because in ancient Arabia, the world was a considerably smaller place than the contemporary mass-communication globalised mess. A lot of these religious morals have been taken forward by secular humanist thinkers and activists to exalt a kind of futile save-the-world mentality, which I do think is not a little vain, and reflects a certain kind of reluctance to accept one's mortality, or an ability to be honest and humble among one's peers to admit that you in fact don't hopelessly fall in love with every single person you happen to meet on the street or hear of on the news. I'm not saying you shouldn't in a certain sense love the world, but for heaven's sake, let us have some sobriety and perspective. Anyhow, this is getting very philosophical very quickly.

On the economics of usury: I read Marx but I'm most certainly not a Marxist by any means, and I'm even uneasy about Henry Georgian land reforms too, if you're familiar with them. It does make a good deal of sense in densely populated areas to tax or nationalize land, but if it's at all possible, people should be able to freely hold land without taxation, or draconian planning restrictions or anything like that.

Spare the countryside, that's what I say. A good deal of bad law is made by subordinating city and country under one body of law. In the ancient world this was not how things were done; the city would take care of the city, and the countryside would take care of the countryside.

This all might seem off-topic, but I tell you, all of this comes into question when you take on the task of defining very carefully what usury is. Being a landlord, or selling permissions to extract natural resource from private land, is in most cases usury, though it doesn't come under the biblical prohibition against money lending, because that's the only form of passive exploitation of the day. It takes the world's very sophisticated structures of law to invent ways of usury that go beyond lending out your gold coins.

I don't want to be critical of Islamic banks, because to the best of my knowledge, they TRY to supplant rent-seeking with profit seeking. Does it work? Well it is surely at least more moral than what we have now.


I mean if we are over the next few years about to be subjected to a series of angry far-left nutcase governments because of another financial crisis, then I do hope that when they begin their desperate search for alternatives to what they perceive as "capitalism" that someone will put in a good word for Islamic banking, because state-communism or anarcho-communism are not viable alternatives.

Collapses happen quicker than rises. The next financial crisis (and this may be the beginning of it) will occur with such rapidity and ferocity that mouths will be agape and reactions will be little more than frozen stares. Arguments over who might be to blame are, at best, silly, and actually, foolish. Raynor-Hills command of history and understanding of finance is extraordinary. HMK wants to believe that the FED's original mandate was [admirable]. Truth be told, the FED was created by Eastern bankers to control wildcat Western bankers who were making a fortune that they weren't able to participate in unless they they could halt the spread of independent banking. And they did. John Maynard Keynes helped them convince Congress that borrowing and spending was preferable to saving and producing. It all worked for about a century. But a century is not a long time in the grand scheme of things. Deflation is the classical economist's best known weapon... and they don't actually have to wield it, it wields itself with reckless abandon. It's only target is debt. Once debt is eliminated it sheathes itself. How long the weapon will attack the current global debt bubble is yet to be determined. But be assured, the debt-seeking sword will hack away until most debt is gone, be it years or decades. Those that understand can actually protect themselves, those that don't... well, the world will be very different place for them when the ravage is over.

Ten might be pushing it, R-H. :-)