Debt- A Modern Money Theory (small)

Money started out to be pieces of gold that were hard to find and carry.

Then it was improved by being represented by pieces of paper.

Occasionally people lost confidence in paper money and occasionally nations needed more money than there was gold to back it up. 

Money was greatly improved when nations freed their money from the constraints of gold and printed it from “thin air”.

The banks could now lend as much money as was needed to keep the economy running and growing. People took advantage of this lending frenzy and accumulated debt. Many felt that a debt based economy was a form of enslavement that replaced chains and whips. Fortunately, it is possible to be free from this enslavement.

Those who fearfully believe that debt enslaves, save more and spend less. They save for a "rainy day." The less they spend, the less they contribute to the economy.

Those who fearlessly believe in their freedom and embrace debt as a liberator borrow as much money as they can. They power the flow of money and keep the economy moving.

The more successful were the ones deepest in debt. They used their loans to provide products and services and jobs for the smaller businesses. Both big and small businesses provided workers with money to spend on products and services to keep the economy running.

When the economy is stalled because of war or a pandemic outbreak, to get the economy flowing again, money has to be created.

This infusion of new money ironically drains the savings of those who fearfully chose to save their money for a rainy day. The savers end up living up to their name and save the economy by bailing out the spenders. New money is pushed to those with the strongest chance of recovering, so that they could start the flow of money and get the economy running. 

The latest monetary theory of economist called Modern Money Theory (MMT) claims that as long as a nation has its own sovereign money, it can never go bankrupt as it never has to borrow money. It can create money from "thin air". Other monetary theories have governments first borrow money from the nation before they spend it.  They set interest rates to control inflation and collect taxes to pay off the debts. MMT on the other hand works opposite to this. Governments set interest rates to determine how much money to create to ensure full employment. They collects taxes to control inflation. 

The government creates as much money as needed to keep a healthy economy running. The money, created out of "thin air" is given out as loans to the private sector. It is also used for military,  work guarantee programs, infrastructure, health care,  education, unemployment and welfare. Taxes are collected to control inflation ensuring any excess money is flushed from the economy.  

With close to zero interest rates, creation of money “from thin” air, and bail outs of the “too big to fail”, our leaders seem to follow some wise advice written in some books of wisdom claiming that banks should not charge interest, and that debt should be forgiven.

The important thing is to get the economy running. 

When governments go bankrupt, they bail themselves out by creating money. When citizens go bankrupt, they lose their small business and their homes and become tenants dependent on their landlords and bosses. 

In communism and socialism, the government controls the corporations. The corporations determine the supply and influence the demand. The citizens on the bottom are left dependent on the government and end up trading freedoms for security willingly or unwillingly. 

In capitalism, the corporations control the government by controlling the politicians. The corporations determine the supply and influence the demand. The citizens on the bottom are left dependent on the corporations who offer them freedoms of consumerism. These freedoms are targeted and valued by adults who willingly take risks to get ahead in life. The children and elderly on the other hand have little freedoms and value their security more.  

Communism, socialism or capitalism put the people, the citizens on the bottom. In a just world, they should be on the top controlling the government and determining demand that influence the corporations to supply.  

Money makes the world turn round and as long as there is money, there will be money stores called banks that supply the world with it. In the beginning were kings that issued gold pieces as money. Then came entrepreneurs that managed money of kings and showed that controlling money gave them great powers and riches. Some people realized that by controlling money of people gave them great prestige and power. Many money stores opened and printed notes called money that was backed by gold. When they cheated and printed more money than they had gold, they became bankrupt. The most powerful and biggest banks formed a group called the central bank to protect people effected by bankrupt banks. When the central bank became bankrupt, they decided that backing their money with gold was not such a good idea and created money out of "thin air" called fiat money. With fiat money, as much of it as is needed could be created without having to have any gold to back it up.

The role of the central bank was to ensure that there was always enough money to fulfill the requirements of the government to provide services and the commercial banks to make loans and have money flow in the economy. The commercial banks made money by lending out money to people to provide a product or service which would attract more money and ensure that the money would be paid back with interest. The commercial bank returned the money to the central bank and kept the interest as profit. If too many people were not able to repay their loans, the commercial bank could not repay the central bank and would become bankrupt.

The central bank also set interest rates to regulate how much money the commercial banks lent out. The lower the interest rates were, the more people applied for loans. The more collateral a person had, the more likely he was to get the loan. Loans for houses are easier to get than loans for small businesses, despite that small businesses generated more productivity. Issuing money to productive sectors caused money to flow so that there is too much money and demand chasing the supply and causing prices to increase as seen in inflation. Issuing money to non productive sectors slows the flow of money so that too little money chase too many product causing prices to fall as seen in recessions.

People who do not trust fiat money or the banks that create it can hoard gold. 

People who are unwilling to support gold miners who damage and pollute the environment can instead support Bitcoin miners using cryptography and the internet to mine “digital gold” that could be also used as “digital cash.”

Bitcoin offers all the benefits of gold without any of its disadvantages and an ease of use for anonymous payments on the internet. 

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INDEX (small)

 WELCOME TO:

https://andrewvecseybooks.blogspot.com/

Economics

Money as a story

https://andrewvecseyeconomics.blogspot.com/2020/03/money-as-story-small.html

Evolution of money
https://andrewvecseyeconomics.blogspot.com/2020/03/evolution-of-money-small.html

Tor network
https://andrewvecseyeconomics.blogspot.com/2020/03/tor-network-small.html

Swiss National Bank
https://andrewvecseyeconomics.blogspot.com/2020/03/swiss-national-bank-small.html

Internet
https://andrewvecseyeconomics.blogspot.com/2020/03/internet-small.html

Evolution of banks
https://andrewvecseyeconomics.blogspot.com/2020/03/evolution-of-banks-small.html

Money speculators
https://andrewvecseyeconomics.blogspot.com/2020/03/money-speculators-small.html

Debt

https://andrewvecseyeconomics.blogspot.com/2020/05/debt-small.html

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Internet (small)

The Internet is the global system of interconnected computer networks that link devices worldwide. All the devices have an address and can be connected to any other device with back-up links that are routed around any of the links that are broken.



The data is cut up in packets and with the addition of encryption a resilient/secure communication link is offered.


Devices called servers store data that devices called clients access. The Internet carries a vast range of information resources and services, such as presentation of the data using WWW browsers, email, telephony and file sharing.

The Internet has no single centralized governance in either technological implementation or policies for access and usage; each constituent network sets its own policies. Globally unified name spaces are essential for maintaining the global reach of the Internet. This role of ICANN distinguishes it as perhaps the only central coordinating body for the global Internet. ICANN is governed by an international board of directors drawn from across the Internet technical, business, academic, and other non-commercial communities.

The technical underpinning and standardization of the core protocols is an activity of the Internet Engineering Task Force (IETF), a non-profit organization of loosely affiliated international participants that anyone may associate with by contributing technical expertise.

In the 1960s the US government commissioned to build robust, fault-tolerant communication with computer networks to secure against a devastating nuclear attack. The primary precursor network, the ARPANET, initially interconnected academic and military networks in the 1980s.

Private funding for other commercial extensions, led to worldwide participation as generations of personal, and mobile computers were connected to the network.



Email was born in 1971 when a computer engineer began using the @ symbol to designate which computer a message should go to.

English scientist Tim Berners-Lee invented the World Wide Web (WWW) in 1989. WWW is an information system where documents and other web resources are identified by Uniform Resource Locators (URLs, such as https://www.example.com/) and are displayed by applications called web browsers.

The World Wide Web has been central to the development of the Information Age and is the primary tool billions of people use to interact on the Internet. Soon, everyone with an internet access was able to publish pages accessible by everyone else. As the number of pages increased, search engines were developed to index them.


Commercial Internet service providers (ISPs) emerged in the 1980s offering services and technologies that in the next 20 years influenced virtually every aspect of modern life. Telephony, radio, television, paper mail and newspapers were reshaped, redefined, or even bypassed by the Internet, giving birth to new services such as email, Internet telephony, Internet television, online music, digital newspapers, and video streaming websites. Soon, everyone with an internet access was able to access all the information to all the knowledge they searched for. This transparency of information and facts greatly helped to uncover corruption.




Since 2000, the Internet has enabled and accelerated new forms of personal interactions through instant messaging, Internet forums, social networking and online banking and shopping. The Internet continues to grow, driven by ever greater amounts of online information and knowledge, commerce, entertainment and social networking. Along with the taming of fire, speaking, writing, and mass media, the internet starts a new chapter in the evolution of humans.

Everyone having internet access, whether paid from home or free from public access points has great powers. They can publish and broadcast their own magazine, radio or TV station with their mobile phones using free platforms such as blogs, podcasts, YouTube and other streaming channels accessible by everyone world wide and at any time. They can advertise their content on social network platforms. They can also share posts they consider worthy to be shared.

Like posts of cute cats that end up going viral.

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Tor network (small)

Edward Snowden worked at the National Security Agency of the USA and whistleblowed about the rampant unauthorized worldwide spying going on.

People began to realize that "big brother" was already watching over all of us.

Phones are basically tracking devices that can make phone calls. Because even the poorest person has a phone, NSA is able to collected information on where you are, what you do and say, and who you communicate with.

NSA is surveilling everyone in the world that they can track.

The US Office of Naval Intelligence developed Tor for its own protection and for securely transmitting diplomatic traffic for the US State Department.

The US government promotes its use for oppressed populations that they support because the Tor network not only protects the identity of dissenters, it also allows them to reach sites on the internet that are censored and blocked.

Messages from a sender to a receiver on the Tor network are encrypted by using the public key of the receiver to lock messages to make them unreadable to anyone without the receiver's private key. The public key is like a lock that can only be opened by its corresponding private key.

Anonymity loves a crowd, especially when it is diverse.

Tor network is used by whistleblowers,

criminals, and

activists to protect their privacy, investigative journalists to protect their sources and

the military, police and businesses to protect their communication networks.

It is used by people to allow them to circumvent censorship and/or to voice their opinions anonymously without the fear of reprisals from repressive governments and to have access to censored and blocked sites.

If you want to anonymously carry a secret packet from one place to another without getting caught, you best

zigzag thru a crowd without taking a direct route and leave no trace behind.

You need also to hide the packet so that it cannot be easily found. The very same criteria are needed to remain anonymous on the internet. Fortunately Tor network provides all those criterion.

Tor network protects you by bouncing your communications around a distributed network of relays run by a crowd of volunteers all around the world. By using proxies and encryption, it prevents anyone watching your connection from learning what sites you visit, and it prevents the sites you visit from learning your physical location.

The software that allows any computer to use the Tor network is freely available. Its open source code ensures that it stays free of any centralized control, free of any back-doors used to compromise the network, and free of any cost to the user. It has no accounts with passwords and user names. It keeps no logs and has neither central repository nor registry of addresses.

Tor encrypts the data, including the destination IP address, multiple times and sends it through a virtual circuit comprising successive, randomly selected Tor relays. Each relay decrypts a layer of encryption to reveal only the next relay in the circuit in order to pass the remaining encrypted data on to it. The final relay decrypts the innermost layer of encryption and sends the original data to its destination without revealing, or even knowing, the source IP address. Because the routing of the communication is concealed at every hop in the Tor circuit, this method eliminates any single point at which the communicating peers can be determined through network surveillance.

Servers configured to receive inbound connections only through Tor are called “hidden services” and allow users to publish web sites and other services without needing to reveal the location of the site. Rather than revealing a hidden server's IP address, and thus its network location, a hidden service is accessed through its "hidden service descriptors". The descriptor changes every 10 minutes and specifies 3 randomly picked volunteer proxy nodes in the Tor network. onion address.

The hidden services "onion addresses" are based on public keys of the hidden servers. The Tor network understands these addresses and can route data to and from hidden services, while preserving the anonymity of both clients and servers. These onion addresses are generated and stored in a onion address database that stores the hidden service descriptors. Other than the onion address database, Tor is decentralized by design.

A hidden service wanting to set up a connection to communicate with another node randomly chooses 3 nodes among the thousands of nodes that volunteer and agree to play the role of proxies.

The nodes are listed by a special node called the directory node. The 3 nodes are called the entry node, the relay node and the exit node. The hidden service exchanges public keys with each of the 3 nodes and messages are repeatedly encrypted as they are sent through the 3 nodes.

Each of the 3 nodes removes a layer of encryption to uncover routing instructions, and sends the message to the next router where this is repeated. This prevents these intermediary nodes from knowing the origin, destination, and contents of the message. The circuit thru the 3 nodes is broken after 10 minutes and a new one is built to thwart any attempts of attack or spying.

The hidden server then publishes a descriptor containing its public key and the addresses of its 3 introduction points and receives an onion address. In effect the hidden server advertises its service and introduction points and its anonymous name it will use for the next 10 minutes.

If a client wants to contact hidden services, it finds the descriptor of the hidden service and the introduction points of the 3 proxies it will use for the next 10 minutes.

It chooses a randomly picked node in the Tor network and asks it to act as a rendezvous point by telling it a one-time secret. Then it assembles an introduction message that includes the address of the rendezvous point and the one-time secret.

The client sends this message to entry node for the hidden server and requests that the message be delivered to the hidden server via the relay and exit nodes. The encrypted message from the client to the hidden server is “please meet me at my rendezvous point and identify yourself with my one-time secret”.

The hidden server creates a circuit to the rendezvous point and identifies itself by sending the one-time secret allowing client and hidden service to communicate with each other. The rendezvous point simply relays end-to-end encrypted messages between the client and the hidden server.

The Tor network, with hidden black marketplace services like Silk Road can be combined with the electronic currency called

which is as anonymous as cash. With this combination, what you buy and who you buy from can be kept private.

National postal facilities are at present prohibited from opening your letters and parcels that originate within your country. This combination of Tor, Bitcoin and post office privacy allows you to buy goods, whether legal or not, anonymously and have them discretely and securely delivered to your home.

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